Note: If you require special accommodations under the Americans with Disabilities Act, please contact Flor E. Koll at 956-402-4762 at least 24 hours before the meeting. HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY NOTICE OF AND AGENDA FOR A SPECIAL MEETING TO BE HELD BY THE BOARD OF DIRECTORS DATE: WEDNESDAY, SEPTEMBER 4, 2013 TIME: 5:30 PM PLACE: PHARR CITY HALL CITY COMMISSION CHAMBERS 118 SOUTH CAGE BOULEVARD, 2 nd FLOOR PHARR, TEXAS 78577 PRESIDING: DENNIS BURLESON, CHAIRMAN CALL TO ORDER FOR WORKSHOP 1. Presentation on local government investment service provided by TexSTAR. ADJOURNMENT OF WORKSHOP CALL TO ORDER FOR SPECIAL MEETING PUBLIC COMMENT 1. REPORTS A. State Highway 365 Project – Louis Jones, Program Manager B. International Bridge Trade Corridor – Pilar Rodriguez, Executive Director 2. RESOLUTIONS A. Resolution 2013-27 – Approval of proposed schedule for issuance of Hidalgo County Regional Mobility Authority 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects. B. Resolution 2013-28 – Authorization to establish a local government fund investment pool account with TexSTAR. C. Resolution 2013-29 – Authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts. 3. EXECUTIVE SESSION, CHAPTER 551, TEXAS GOVERNMENT CODE, SECTION 551.071 (CONSULTATION WITH ATTORNEY), SECTION 551.072 (DELIBERATION OF REAL PROPERTY) AND SECTION 551.074 (PERSONNEL MATTERS) A. Consultation with Board Attorney on legal issues pertaining to financing options, including current obligations (Section 551.071 T.G.C.). B. Consultation with Board Attorney on legal issues pertaining to the issuance of Hidalgo County Regional Mobility Authority Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects (Section 551.071 T.G.C.). C. Consultation with Board Attorney on legal issues pertaining to the establishment of a local government fund investment pool account with TexSTAR (Section 551.071 T.G.C.). ADJOURNMENT OF SPECIAL MEETING C E R T I F I C A T I O N I, the Undersigned Authority, do hereby certify that the attached agenda of the Hidalgo County Regional Mobility Authority Board of Directors is a true and correct copy and that I posted a true and correct copy of said notice on the Hidalgo County Regional Mobility Web Page (www.hcrma.net) and on the bulletin board in the Hidalgo County Court House (100 North Closner, Edinburg, Texas 78539), a place convenient and readily accessible to the general public at all times, and said Notice was posted on the 29 th day of August, 2013 at 12:00 pm and will remain so posted continuously for at least 72 hours preceding the scheduled time of said meeting in accordance with Chapter 551 of the Texas Government Code. Flor E. Koll Program Administrator
Transcript
Note If you require special accommodations under the Americans with Disabilities Act please contact Flor E Koll at 956-402-4762 at least 24 hours before the meeting
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY NOTICE OF AND AGENDA FOR A SPECIAL MEETING
TO BE HELD BY THE BOARD OF DIRECTORS
DATE WEDNESDAY SEPTEMBER 4 2013 TIME 530 PM PLACE PHARR CITY HALL CITY COMMISSION CHAMBERS
118 SOUTH CAGE BOULEVARD 2nd FLOOR PHARR TEXAS 78577
PRESIDING DENNIS BURLESON CHAIRMAN
CALL TO ORDER FOR WORKSHOP 1 Presentation on local government investment service provided by TexSTAR ADJOURNMENT OF WORKSHOP
CALL TO ORDER FOR SPECIAL MEETING
PUBLIC COMMENT
1 REPORTS
A State Highway 365 Project ndash Louis Jones Program Manager B International Bridge Trade Corridor ndash Pilar Rodriguez Executive Director
2 RESOLUTIONS
A Resolution 2013-27 ndash Approval of proposed schedule for issuance of Hidalgo County Regional Mobility
Authority 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects B Resolution 2013-28 ndash Authorization to establish a local government fund investment pool account with
TexSTAR C Resolution 2013-29 ndash Authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First
National Bank Accounts
3 EXECUTIVE SESSION CHAPTER 551 TEXAS GOVERNMENT CODE SECTION 551071 (CONSULTATION WITH ATTORNEY) SECTION 551072 (DELIBERATION OF REAL PROPERTY) AND SECTION 551074 (PERSONNEL MATTERS) A Consultation with Board Attorney on legal issues pertaining to financing options including current
obligations (Section 551071 TGC) B Consultation with Board Attorney on legal issues pertaining to the issuance of Hidalgo County Regional
Mobility Authority Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects (Section 551071 TGC)
C Consultation with Board Attorney on legal issues pertaining to the establishment of a local government fund investment pool account with TexSTAR (Section 551071 TGC)
ADJOURNMENT OF SPECIAL MEETING C E R T I F I C A T I O N
I the Undersigned Authority do hereby certify that the attached agenda of the Hidalgo County Regional Mobility Authority Board of Directors is a true and correct copy and that I posted a true and correct copy of said notice on the Hidalgo County Regional Mobility Web Page (wwwhcrmanet) and on the bulletin board in the Hidalgo County Court House (100 North Closner Edinburg Texas 78539) a place convenient and readily accessible to the general public at all times and said Notice was posted on the 29th day of August 2013 at 1200 pm and will remain so posted continuously for at least 72 hours preceding the scheduled time of said meeting in accordance with Chapter 551 of the Texas Government Code
Flor E Koll Program Administrator
This Page Intentionally Left Blank
Item 2A
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2A
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 1 Agenda Item RESOLUTION 2013-27 ndash APPROVAL OF PROPOSED SCHEDULE FOR
ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR THE SH 365 AND IBTC PROJECTS
2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and approval of proposed schedule for the issuance of HCRMA 2013 Vehicle
Registration Fee Revenue Bond for SH 365 and IBTC Projects 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-27 ndash Approval of the Schedule
for the Issuance of Hidalgo County Regional Mobility Authority 2013 Vehicle Registration Fee Revenue Bonds for SH 365 and IBTC Projects
6 Program Managerrsquos Recommendation X Approved Disapproved None 7 Board Attorneyrsquos Recommendation Approved Disapproved X None 8 Chief Financial Officerrsquos Recommendation Approved Disapproved X None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Approval of the Proposed Schedule for the Issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects
Background At the July 9 2013 regular meeting the Hidalgo County Commissioners Court approved the Transportation Project amp Pledge Agreement which authorizes the Hidalgo County Regional Mobility Authority (HCRMA) to pledge the Vehicle Registration Fee for long term debt to develop and construct transportation projects in the County On August 21 2013 the HCRMA Board of Director approved the Transportation Project and Pledge Agreement On August 26 2013 the HCRMA Board of Directors held a Retreat and discussed the estimated development costs for the State Highway 365 (SH 365) and International Bridge Trade Corridor (IBTC) Projects as well as the financing elements for both projects A proposed schedule for issuance of long term debt that pledged the Vehicle Registration Fee was also discussed Goal With approval of the Transportation Project amp Pledge Agreement by the Hidalgo County Commissioners Court and HCRMA Board of Director staff is requesting approval of the schedule for issuance of the 2013 Vehicle Registration Fee Revenue Bond for advance project development and construction of the SH 365 and IBTC Projects The proposed schedule for issuance of an approximately $622 Million bond is as follows
bull Board approval of Bond Documents and Underwriting Syndicate September 18 bull Rating Agency Presentations Week of September 30 bull Posting of Preliminary Official Statement Week of October 14 bull Market Pricing Week of October 28 bull Distribute Official Statement Week of November 4 bull Closing Week of November 25
Additionally I have attached a copy of the finance plan prepared by First Southwest for your review and consideration Options The proposed schedule may be adjusted or disapproved however financing of the work necessary to complete the projects in a timely manner may be placed at risk due to the time constraints and aggressive schedule for both the SH 365 and IBTC Projects Recommendation Based on review by this office approval of the proposed bond issuance schedule is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
BOARD RESOLUTION No 2013 ndash 27
APPROVAL OF PROPOSED SCHEDULE FOR ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR SH 365 AND IBTC PROJECTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Directors of the Hidalgo County Regional Mobility Authority at a regular meeting
WHEREAS on April 21 2005 Hidalgo County (the ldquoCountyrdquo) petitioned the Texas Transportation Commission (the ldquoCommissionrdquo) for authorization to form the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) pursuant to provisions of the Texas Transportation Code and
WHEREAS in Minute Order No 110315 adopted by the Commission on November 17 2005 the Commission authorized the creation of the Authority and
WHEREAS at a duly called and noticed meeting on August 14 2007 the County pursuant to Section 502402 of the Texas Transportation Code (combined with other applicable provisions of the Texas Transportation Code the ldquoAuthorizing Lawrdquo) adopted an order (the ldquoAdoption Orderrdquo) authorizing the adoption and implementation of the Optional Vehicle Registration Fee in the amount of $1000 to be effective on January 1 2008 (the ldquoVehicle Feerdquo) and
WHEREAS the Authorizing Law requires that the County remit the revenue from the Vehicle Fee to the Authority to fund long-term transportation projects in the County and
WHEREAS it has been determined that such long-term transportation projects (the ldquoProjectsrdquo) as further described herein will benefit the County and its residents through improved mobility increased safety enhanced economic development and expansion of the tax base which will result in increased revenues to support the County and the provision of services to residents and
WHEREAS the Authority on its own or through an entity created by the Authority intends to issue debt with a maximum repayment term of no more than 40 years in one or more lawful forms including but not limited to bonds or other obligations to obtain financing necessary to develop the Projects and
WHEREAS pursuant to the Authorizing Law the County is authorized to enter into an Agreement with the Authority to acquire construct and maintain the Projects and
WHEREAS the County approved the Transportation Project and Pledge Agreement on July 9 2013 and the Authority approved the agreement on August 21 2013
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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IO
NA
L
MO
BI
LI
TY
A
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TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
R
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NA
L
MO
BI
LI
TY
A
UT
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TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
UN
TY
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NA
L
MO
BI
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TY
A
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UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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NA
L
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TY
A
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
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BI
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TY
A
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Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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NA
L
MO
BI
LI
TY
A
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TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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TY
A
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The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
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TY
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NA
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MO
BI
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TY
A
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The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
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TY
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NA
L
MO
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TY
A
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Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
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The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
R
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NA
L
MO
BI
LI
TY
A
UT
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TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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IO
NA
L
MO
BI
LI
TY
A
UT
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TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
L
MO
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TY
A
UT
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TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
MO
BI
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TY
A
UT
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TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
This Page Intentionally Left Blank
Item 2A
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2A
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 1 Agenda Item RESOLUTION 2013-27 ndash APPROVAL OF PROPOSED SCHEDULE FOR
ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR THE SH 365 AND IBTC PROJECTS
2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and approval of proposed schedule for the issuance of HCRMA 2013 Vehicle
Registration Fee Revenue Bond for SH 365 and IBTC Projects 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-27 ndash Approval of the Schedule
for the Issuance of Hidalgo County Regional Mobility Authority 2013 Vehicle Registration Fee Revenue Bonds for SH 365 and IBTC Projects
6 Program Managerrsquos Recommendation X Approved Disapproved None 7 Board Attorneyrsquos Recommendation Approved Disapproved X None 8 Chief Financial Officerrsquos Recommendation Approved Disapproved X None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Approval of the Proposed Schedule for the Issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects
Background At the July 9 2013 regular meeting the Hidalgo County Commissioners Court approved the Transportation Project amp Pledge Agreement which authorizes the Hidalgo County Regional Mobility Authority (HCRMA) to pledge the Vehicle Registration Fee for long term debt to develop and construct transportation projects in the County On August 21 2013 the HCRMA Board of Director approved the Transportation Project and Pledge Agreement On August 26 2013 the HCRMA Board of Directors held a Retreat and discussed the estimated development costs for the State Highway 365 (SH 365) and International Bridge Trade Corridor (IBTC) Projects as well as the financing elements for both projects A proposed schedule for issuance of long term debt that pledged the Vehicle Registration Fee was also discussed Goal With approval of the Transportation Project amp Pledge Agreement by the Hidalgo County Commissioners Court and HCRMA Board of Director staff is requesting approval of the schedule for issuance of the 2013 Vehicle Registration Fee Revenue Bond for advance project development and construction of the SH 365 and IBTC Projects The proposed schedule for issuance of an approximately $622 Million bond is as follows
bull Board approval of Bond Documents and Underwriting Syndicate September 18 bull Rating Agency Presentations Week of September 30 bull Posting of Preliminary Official Statement Week of October 14 bull Market Pricing Week of October 28 bull Distribute Official Statement Week of November 4 bull Closing Week of November 25
Additionally I have attached a copy of the finance plan prepared by First Southwest for your review and consideration Options The proposed schedule may be adjusted or disapproved however financing of the work necessary to complete the projects in a timely manner may be placed at risk due to the time constraints and aggressive schedule for both the SH 365 and IBTC Projects Recommendation Based on review by this office approval of the proposed bond issuance schedule is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
BOARD RESOLUTION No 2013 ndash 27
APPROVAL OF PROPOSED SCHEDULE FOR ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR SH 365 AND IBTC PROJECTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Directors of the Hidalgo County Regional Mobility Authority at a regular meeting
WHEREAS on April 21 2005 Hidalgo County (the ldquoCountyrdquo) petitioned the Texas Transportation Commission (the ldquoCommissionrdquo) for authorization to form the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) pursuant to provisions of the Texas Transportation Code and
WHEREAS in Minute Order No 110315 adopted by the Commission on November 17 2005 the Commission authorized the creation of the Authority and
WHEREAS at a duly called and noticed meeting on August 14 2007 the County pursuant to Section 502402 of the Texas Transportation Code (combined with other applicable provisions of the Texas Transportation Code the ldquoAuthorizing Lawrdquo) adopted an order (the ldquoAdoption Orderrdquo) authorizing the adoption and implementation of the Optional Vehicle Registration Fee in the amount of $1000 to be effective on January 1 2008 (the ldquoVehicle Feerdquo) and
WHEREAS the Authorizing Law requires that the County remit the revenue from the Vehicle Fee to the Authority to fund long-term transportation projects in the County and
WHEREAS it has been determined that such long-term transportation projects (the ldquoProjectsrdquo) as further described herein will benefit the County and its residents through improved mobility increased safety enhanced economic development and expansion of the tax base which will result in increased revenues to support the County and the provision of services to residents and
WHEREAS the Authority on its own or through an entity created by the Authority intends to issue debt with a maximum repayment term of no more than 40 years in one or more lawful forms including but not limited to bonds or other obligations to obtain financing necessary to develop the Projects and
WHEREAS pursuant to the Authorizing Law the County is authorized to enter into an Agreement with the Authority to acquire construct and maintain the Projects and
WHEREAS the County approved the Transportation Project and Pledge Agreement on July 9 2013 and the Authority approved the agreement on August 21 2013
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
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INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
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I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Item 2A
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2A
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 1 Agenda Item RESOLUTION 2013-27 ndash APPROVAL OF PROPOSED SCHEDULE FOR
ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR THE SH 365 AND IBTC PROJECTS
2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and approval of proposed schedule for the issuance of HCRMA 2013 Vehicle
Registration Fee Revenue Bond for SH 365 and IBTC Projects 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-27 ndash Approval of the Schedule
for the Issuance of Hidalgo County Regional Mobility Authority 2013 Vehicle Registration Fee Revenue Bonds for SH 365 and IBTC Projects
6 Program Managerrsquos Recommendation X Approved Disapproved None 7 Board Attorneyrsquos Recommendation Approved Disapproved X None 8 Chief Financial Officerrsquos Recommendation Approved Disapproved X None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Approval of the Proposed Schedule for the Issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects
Background At the July 9 2013 regular meeting the Hidalgo County Commissioners Court approved the Transportation Project amp Pledge Agreement which authorizes the Hidalgo County Regional Mobility Authority (HCRMA) to pledge the Vehicle Registration Fee for long term debt to develop and construct transportation projects in the County On August 21 2013 the HCRMA Board of Director approved the Transportation Project and Pledge Agreement On August 26 2013 the HCRMA Board of Directors held a Retreat and discussed the estimated development costs for the State Highway 365 (SH 365) and International Bridge Trade Corridor (IBTC) Projects as well as the financing elements for both projects A proposed schedule for issuance of long term debt that pledged the Vehicle Registration Fee was also discussed Goal With approval of the Transportation Project amp Pledge Agreement by the Hidalgo County Commissioners Court and HCRMA Board of Director staff is requesting approval of the schedule for issuance of the 2013 Vehicle Registration Fee Revenue Bond for advance project development and construction of the SH 365 and IBTC Projects The proposed schedule for issuance of an approximately $622 Million bond is as follows
bull Board approval of Bond Documents and Underwriting Syndicate September 18 bull Rating Agency Presentations Week of September 30 bull Posting of Preliminary Official Statement Week of October 14 bull Market Pricing Week of October 28 bull Distribute Official Statement Week of November 4 bull Closing Week of November 25
Additionally I have attached a copy of the finance plan prepared by First Southwest for your review and consideration Options The proposed schedule may be adjusted or disapproved however financing of the work necessary to complete the projects in a timely manner may be placed at risk due to the time constraints and aggressive schedule for both the SH 365 and IBTC Projects Recommendation Based on review by this office approval of the proposed bond issuance schedule is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
BOARD RESOLUTION No 2013 ndash 27
APPROVAL OF PROPOSED SCHEDULE FOR ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR SH 365 AND IBTC PROJECTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Directors of the Hidalgo County Regional Mobility Authority at a regular meeting
WHEREAS on April 21 2005 Hidalgo County (the ldquoCountyrdquo) petitioned the Texas Transportation Commission (the ldquoCommissionrdquo) for authorization to form the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) pursuant to provisions of the Texas Transportation Code and
WHEREAS in Minute Order No 110315 adopted by the Commission on November 17 2005 the Commission authorized the creation of the Authority and
WHEREAS at a duly called and noticed meeting on August 14 2007 the County pursuant to Section 502402 of the Texas Transportation Code (combined with other applicable provisions of the Texas Transportation Code the ldquoAuthorizing Lawrdquo) adopted an order (the ldquoAdoption Orderrdquo) authorizing the adoption and implementation of the Optional Vehicle Registration Fee in the amount of $1000 to be effective on January 1 2008 (the ldquoVehicle Feerdquo) and
WHEREAS the Authorizing Law requires that the County remit the revenue from the Vehicle Fee to the Authority to fund long-term transportation projects in the County and
WHEREAS it has been determined that such long-term transportation projects (the ldquoProjectsrdquo) as further described herein will benefit the County and its residents through improved mobility increased safety enhanced economic development and expansion of the tax base which will result in increased revenues to support the County and the provision of services to residents and
WHEREAS the Authority on its own or through an entity created by the Authority intends to issue debt with a maximum repayment term of no more than 40 years in one or more lawful forms including but not limited to bonds or other obligations to obtain financing necessary to develop the Projects and
WHEREAS pursuant to the Authorizing Law the County is authorized to enter into an Agreement with the Authority to acquire construct and maintain the Projects and
WHEREAS the County approved the Transportation Project and Pledge Agreement on July 9 2013 and the Authority approved the agreement on August 21 2013
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
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TY
R
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IO
NA
L
MO
BI
LI
TY
A
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TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
MO
BI
LI
TY
A
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TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
MO
BI
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TY
A
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UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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NA
L
MO
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TY
A
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
MO
BI
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TY
A
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TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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NA
L
MO
BI
LI
TY
A
UT
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TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2A
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 1 Agenda Item RESOLUTION 2013-27 ndash APPROVAL OF PROPOSED SCHEDULE FOR
ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR THE SH 365 AND IBTC PROJECTS
2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and approval of proposed schedule for the issuance of HCRMA 2013 Vehicle
Registration Fee Revenue Bond for SH 365 and IBTC Projects 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-27 ndash Approval of the Schedule
for the Issuance of Hidalgo County Regional Mobility Authority 2013 Vehicle Registration Fee Revenue Bonds for SH 365 and IBTC Projects
6 Program Managerrsquos Recommendation X Approved Disapproved None 7 Board Attorneyrsquos Recommendation Approved Disapproved X None 8 Chief Financial Officerrsquos Recommendation Approved Disapproved X None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Approval of the Proposed Schedule for the Issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects
Background At the July 9 2013 regular meeting the Hidalgo County Commissioners Court approved the Transportation Project amp Pledge Agreement which authorizes the Hidalgo County Regional Mobility Authority (HCRMA) to pledge the Vehicle Registration Fee for long term debt to develop and construct transportation projects in the County On August 21 2013 the HCRMA Board of Director approved the Transportation Project and Pledge Agreement On August 26 2013 the HCRMA Board of Directors held a Retreat and discussed the estimated development costs for the State Highway 365 (SH 365) and International Bridge Trade Corridor (IBTC) Projects as well as the financing elements for both projects A proposed schedule for issuance of long term debt that pledged the Vehicle Registration Fee was also discussed Goal With approval of the Transportation Project amp Pledge Agreement by the Hidalgo County Commissioners Court and HCRMA Board of Director staff is requesting approval of the schedule for issuance of the 2013 Vehicle Registration Fee Revenue Bond for advance project development and construction of the SH 365 and IBTC Projects The proposed schedule for issuance of an approximately $622 Million bond is as follows
bull Board approval of Bond Documents and Underwriting Syndicate September 18 bull Rating Agency Presentations Week of September 30 bull Posting of Preliminary Official Statement Week of October 14 bull Market Pricing Week of October 28 bull Distribute Official Statement Week of November 4 bull Closing Week of November 25
Additionally I have attached a copy of the finance plan prepared by First Southwest for your review and consideration Options The proposed schedule may be adjusted or disapproved however financing of the work necessary to complete the projects in a timely manner may be placed at risk due to the time constraints and aggressive schedule for both the SH 365 and IBTC Projects Recommendation Based on review by this office approval of the proposed bond issuance schedule is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
BOARD RESOLUTION No 2013 ndash 27
APPROVAL OF PROPOSED SCHEDULE FOR ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR SH 365 AND IBTC PROJECTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Directors of the Hidalgo County Regional Mobility Authority at a regular meeting
WHEREAS on April 21 2005 Hidalgo County (the ldquoCountyrdquo) petitioned the Texas Transportation Commission (the ldquoCommissionrdquo) for authorization to form the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) pursuant to provisions of the Texas Transportation Code and
WHEREAS in Minute Order No 110315 adopted by the Commission on November 17 2005 the Commission authorized the creation of the Authority and
WHEREAS at a duly called and noticed meeting on August 14 2007 the County pursuant to Section 502402 of the Texas Transportation Code (combined with other applicable provisions of the Texas Transportation Code the ldquoAuthorizing Lawrdquo) adopted an order (the ldquoAdoption Orderrdquo) authorizing the adoption and implementation of the Optional Vehicle Registration Fee in the amount of $1000 to be effective on January 1 2008 (the ldquoVehicle Feerdquo) and
WHEREAS the Authorizing Law requires that the County remit the revenue from the Vehicle Fee to the Authority to fund long-term transportation projects in the County and
WHEREAS it has been determined that such long-term transportation projects (the ldquoProjectsrdquo) as further described herein will benefit the County and its residents through improved mobility increased safety enhanced economic development and expansion of the tax base which will result in increased revenues to support the County and the provision of services to residents and
WHEREAS the Authority on its own or through an entity created by the Authority intends to issue debt with a maximum repayment term of no more than 40 years in one or more lawful forms including but not limited to bonds or other obligations to obtain financing necessary to develop the Projects and
WHEREAS pursuant to the Authorizing Law the County is authorized to enter into an Agreement with the Authority to acquire construct and maintain the Projects and
WHEREAS the County approved the Transportation Project and Pledge Agreement on July 9 2013 and the Authority approved the agreement on August 21 2013
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
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Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
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NA
L
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A
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SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
L
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A
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ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
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A
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UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
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TY
A
UT
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Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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NA
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TY
A
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Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
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A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
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The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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A
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The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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A
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Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
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The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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NA
L
MO
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LI
TY
A
UT
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TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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A
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Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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A
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Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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NA
L
MO
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LI
TY
A
UT
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TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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A
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TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Approval of the Proposed Schedule for the Issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond for SH 365 and IBTC Projects
Background At the July 9 2013 regular meeting the Hidalgo County Commissioners Court approved the Transportation Project amp Pledge Agreement which authorizes the Hidalgo County Regional Mobility Authority (HCRMA) to pledge the Vehicle Registration Fee for long term debt to develop and construct transportation projects in the County On August 21 2013 the HCRMA Board of Director approved the Transportation Project and Pledge Agreement On August 26 2013 the HCRMA Board of Directors held a Retreat and discussed the estimated development costs for the State Highway 365 (SH 365) and International Bridge Trade Corridor (IBTC) Projects as well as the financing elements for both projects A proposed schedule for issuance of long term debt that pledged the Vehicle Registration Fee was also discussed Goal With approval of the Transportation Project amp Pledge Agreement by the Hidalgo County Commissioners Court and HCRMA Board of Director staff is requesting approval of the schedule for issuance of the 2013 Vehicle Registration Fee Revenue Bond for advance project development and construction of the SH 365 and IBTC Projects The proposed schedule for issuance of an approximately $622 Million bond is as follows
bull Board approval of Bond Documents and Underwriting Syndicate September 18 bull Rating Agency Presentations Week of September 30 bull Posting of Preliminary Official Statement Week of October 14 bull Market Pricing Week of October 28 bull Distribute Official Statement Week of November 4 bull Closing Week of November 25
Additionally I have attached a copy of the finance plan prepared by First Southwest for your review and consideration Options The proposed schedule may be adjusted or disapproved however financing of the work necessary to complete the projects in a timely manner may be placed at risk due to the time constraints and aggressive schedule for both the SH 365 and IBTC Projects Recommendation Based on review by this office approval of the proposed bond issuance schedule is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
BOARD RESOLUTION No 2013 ndash 27
APPROVAL OF PROPOSED SCHEDULE FOR ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR SH 365 AND IBTC PROJECTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Directors of the Hidalgo County Regional Mobility Authority at a regular meeting
WHEREAS on April 21 2005 Hidalgo County (the ldquoCountyrdquo) petitioned the Texas Transportation Commission (the ldquoCommissionrdquo) for authorization to form the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) pursuant to provisions of the Texas Transportation Code and
WHEREAS in Minute Order No 110315 adopted by the Commission on November 17 2005 the Commission authorized the creation of the Authority and
WHEREAS at a duly called and noticed meeting on August 14 2007 the County pursuant to Section 502402 of the Texas Transportation Code (combined with other applicable provisions of the Texas Transportation Code the ldquoAuthorizing Lawrdquo) adopted an order (the ldquoAdoption Orderrdquo) authorizing the adoption and implementation of the Optional Vehicle Registration Fee in the amount of $1000 to be effective on January 1 2008 (the ldquoVehicle Feerdquo) and
WHEREAS the Authorizing Law requires that the County remit the revenue from the Vehicle Fee to the Authority to fund long-term transportation projects in the County and
WHEREAS it has been determined that such long-term transportation projects (the ldquoProjectsrdquo) as further described herein will benefit the County and its residents through improved mobility increased safety enhanced economic development and expansion of the tax base which will result in increased revenues to support the County and the provision of services to residents and
WHEREAS the Authority on its own or through an entity created by the Authority intends to issue debt with a maximum repayment term of no more than 40 years in one or more lawful forms including but not limited to bonds or other obligations to obtain financing necessary to develop the Projects and
WHEREAS pursuant to the Authorizing Law the County is authorized to enter into an Agreement with the Authority to acquire construct and maintain the Projects and
WHEREAS the County approved the Transportation Project and Pledge Agreement on July 9 2013 and the Authority approved the agreement on August 21 2013
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
UN
TY
R
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IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
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TY
R
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NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
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TY
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NA
L
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TY
A
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SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
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TY
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NA
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A
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ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
UN
TY
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NA
L
MO
BI
LI
TY
A
UT
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TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
MO
BI
LI
TY
A
UT
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TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
BOARD RESOLUTION No 2013 ndash 27
APPROVAL OF PROPOSED SCHEDULE FOR ISSUANCE OF HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY 2013 VEHICLE REGISTRATION FEE REVENUE BOND FOR SH 365 AND IBTC PROJECTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Directors of the Hidalgo County Regional Mobility Authority at a regular meeting
WHEREAS on April 21 2005 Hidalgo County (the ldquoCountyrdquo) petitioned the Texas Transportation Commission (the ldquoCommissionrdquo) for authorization to form the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) pursuant to provisions of the Texas Transportation Code and
WHEREAS in Minute Order No 110315 adopted by the Commission on November 17 2005 the Commission authorized the creation of the Authority and
WHEREAS at a duly called and noticed meeting on August 14 2007 the County pursuant to Section 502402 of the Texas Transportation Code (combined with other applicable provisions of the Texas Transportation Code the ldquoAuthorizing Lawrdquo) adopted an order (the ldquoAdoption Orderrdquo) authorizing the adoption and implementation of the Optional Vehicle Registration Fee in the amount of $1000 to be effective on January 1 2008 (the ldquoVehicle Feerdquo) and
WHEREAS the Authorizing Law requires that the County remit the revenue from the Vehicle Fee to the Authority to fund long-term transportation projects in the County and
WHEREAS it has been determined that such long-term transportation projects (the ldquoProjectsrdquo) as further described herein will benefit the County and its residents through improved mobility increased safety enhanced economic development and expansion of the tax base which will result in increased revenues to support the County and the provision of services to residents and
WHEREAS the Authority on its own or through an entity created by the Authority intends to issue debt with a maximum repayment term of no more than 40 years in one or more lawful forms including but not limited to bonds or other obligations to obtain financing necessary to develop the Projects and
WHEREAS pursuant to the Authorizing Law the County is authorized to enter into an Agreement with the Authority to acquire construct and maintain the Projects and
WHEREAS the County approved the Transportation Project and Pledge Agreement on July 9 2013 and the Authority approved the agreement on August 21 2013
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
WHEREAS the Authority contemplates issuing long term debt by pledging the Vehicle Fee based on a schedule that closes the issuance in November 2013
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board hereby approves the schedule for the issuance of 2013 Vehicle Registration Fee Revenue Bond for the SH 365 and IBTC Projects hereto attached as Exhibit A in furtherance of the development of long-term transportation projects in the County
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
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NA
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TY
A
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Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
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TY
A
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SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
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A
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ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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NA
L
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A
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UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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A
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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NA
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BI
LI
TY
A
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Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
UN
TY
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NA
L
MO
BI
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TY
A
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Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
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IO
NA
L
MO
BI
LI
TY
A
UT
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TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
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A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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TY
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A
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The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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NA
L
MO
BI
LI
TY
A
UT
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TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
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TY
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NA
L
MO
BI
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TY
A
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The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
UN
TY
R
EG
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NA
L
MO
BI
LI
TY
A
UT
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TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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NA
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A
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Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
PASSED AND APPROVED AS TO BE EFFECTIVE IMMEDIATELY BY THE BOARD OF DIRECTORS OF THE HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY AT A REGULAR MEETING duly posted and noticed on the 4th day of September 2013 at which meeting a quorum was present Dennis Burleson Chairman Ricardo Perez SecretaryTreasurer
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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IO
NA
L
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TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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NA
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TY
A
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TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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CO
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TY
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NA
L
MO
BI
LI
TY
A
UT
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RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
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shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
EXHIBIT A
Schedule for Issuance of 2013 Vehicle Registration Fee Revenue Bond
Board approval of Bond Documents and Underwriting Syndicate September 18 2013
Rating Agency Presentations Week of September 30 2013
Posting of Preliminary Official Statement Week of October 14 2013
Market Pricing Week of October 28 2013
Distribute Official Statement Week of November 4 2013
Closing Week of November 25 2013
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
August 26 2013
Hidalgo County Regional Mobility Authority
2013 Board Retreat
FirstSouthwest Presentation Material
Member FINRA amp SIPC copy 2013
First Southwest Company
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Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
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SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
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SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
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ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
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UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
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Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
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Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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NA
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Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
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A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
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The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
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LG
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NA
L
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TY
A
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The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
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Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
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NA
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A
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The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Table of Contents
2 Discussion regarding
matters related to project revenue for SH 365 Tab 1
5 Discussion regarding matters
related to project financing for SH 365 Project Tabs 2 and 3
Appendix Tab 4
1
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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EG
IO
NA
L
MO
BI
LI
TY
A
UT
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TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Tab 1
Project Revenue for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
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TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
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INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Project Sources and Uses ($Millions)
3
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 4106 Financing in 4Q 2013
TxDOT Reimbursement Bond Proceeds 9553 Financing in mid 2015
Toll Revenue (SIB Loan) Proceeds 9700 Financing in early 2017
Grants 193 Cat 10 Funds
Cash 108
Total 23660
USES A mount Notes
Project Cost 21529 Pre-development and
construction
Reserve fund CAPI fund and COI 1952 For all 3 transactions
Total 23481
Surplus(Deficit) 179
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
SH 365 Sources of Funding by Month
4
0
1000
2000
3000
4000
5000
6000
Fu
nd
ing
Am
ou
nt
($000s)
SH 365 Sources of Funding by Month
VRF Bonds$37653
Grants$1926
Cash$1084
TxDOT Reimbursement Bond$79900
Toll Revenue Bond$94729
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
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shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Tab 2
Municipal Bonds 101 and
Project Financing Background for SH 365
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
ISSUER PARTICIPANTS
Financial Advisor A consultant serving as fiduciary who advises the issuer on matters
pertinent to the bond issue such as plan of finance structure timing marketing fairness of
pricing terms and bond ratings
Bond Counsel A specialized attorney retained by the issuer to provide certain legal opinions
relating to the issuerrsquos authority to issue the bonds under Texas law and relating to the exclusion
of interest income for bond holders for federal tax purposes As part of this process bond
counsel prepares the transcript for submission to the Attorney General prepares all transaction
documents and reviews certain aspects of the offering document
Disclosure Counsel An attorney or law firm retained by the issuer to provide advice on issuer
disclosure obligations and to prepare the official statement andor continuing disclosure
agreement
Professional Involved in Public Debt Offering
6
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
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RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
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EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
UNDERWRITING PARTICIPANTS
Underwriter A broker-dealer that purchases a new issue of municipal securities from the
issuer for resale in a primary offering The underwriter may acquire the securities either by
negotiation with the issuer or by award on the basis of competitive bidding The lead
underwriter usually has 50 or higher of the economicsliability of the bond issue
Underwriterrsquos Syndicate A group of underwriters formed to purchase a new issue of municipal
securities from the issuer and offer it for resale to the general public The syndicate is organized
for the purposes of sharing the risks of underwriting the issue obtaining sufficient capital to
purchase an issue and broadening the distribution channels of the issue to the investing public
The remaining economicsliability of the bond issue is spread among the remaining syndicate
members
Underwriterrsquos Counsel An attorney or law firm retained to represent the interests of an
underwriter in connection with the purchase of a new issue of municipal securities
OTHER PARTICIPANTS
Trustee A financial institution that is given fiduciary powers by a bond issuer to enforce the
terms of a bond indenture An indenture is a contract between a bond issuer and a bond holder
A trustee sees that bond interest payments are made as scheduled and protects the interests of
the bondholders if the issuer defaults
Professional Involved in Public Debt Offering (contrsquod)
7
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
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VIA can sell bonds to the public through two different methods of sales
ndash A Competitive Sale or
ndash A Negotiated Sale
In a Competitive Sale
ndash Bonds are offered for sale through a Notice of Sale with sealed bids received
on a specified date
ndash Bidders will be ldquoSyndicatesrdquo of Broker Dealers (investment banks)
ndash The Syndicate which offers the highest pricelowest interest rate is awarded all
the bonds
ndash Once awarded the Syndicate is at risk for re-selling the bonds
In a Negotiated Sale
ndash The issuer chooses a Syndicate which will have the exclusive rights to offer the
Bonds for sale to the Public
ndash The Bonds will be offered for sale on one day ndash HCRMA has flexibility to
change the sale date up until the actual day of sale
ndash On the day of sale HCRMA with the assistance of its financial advisor will
negotiate with the Syndicate the priceinterest rate at which the Bonds will be
sold
Negotiated versus Competitive Sale
8
Member FINRA amp SIPC copy 2013
First Southwest Company
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R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
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INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
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shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
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Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Competitive Sales typically used when
ndash Credit is well known to investors
ndash The transaction size is manageable
ndash The bond market is stable andor demand for bonds is strong
ndash Bond type and features are conventional
ndash Market conditions and interest rate sensitivity are not critical to the
pricing
ndash Local Women or Minority owned firm participation is on a best efforts basis
only and is not required for winning bid andor
ndash There are no complex explanations required during marketing regarding the
project funding mechanism or credit quality
General Reasons for Using a Competitive Sale
9
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Negotiated Sales typically used when
ndash Credit is unknown to investors
ndash Substantial education of investors will be required as to the project the
credit or the structure of the transaction
ndash Participation by local women or minority owned firms is desired or enhanced
ndash Bond market is volatile demand for bonds is weak andor the supply of
competing sales is high
ndash Market conditions and interest rate sensitivity is high such as refunding bonds
ndash Coordination of multiple components of the financing is required
ndash Structural features are unconventional such as forward delivery bonds or
derivatives or structure is not conducive to competitive sale such as variable
rate bonds
ndash Large transaction size andor
ndash Retail participation is expected or desired
General Reasons for Using a Negotiated Sale
10
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
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INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Trust Indenture (Master and Supplemental)
Bond Resolution (including pricing parameters)
Bond Purchase Agreement (Approved by Bond Resolution)
Preliminary and Final Official Statement (Approved by Bond Resolution)
Important bond and offering documents used in the VRF bond transaction
11
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
A trust indenture is a contract between the issuer of municipal securities and a trustee
for the benefit of the bondholders
ndash Establishes the rights duties obligations and remedies of the issuer and trustee
ndash Determines the flow of revenues pledged to the bondholder
ndash Determines the security for the bonds that are held in ldquotrustrdquo by the Trustee
ndash Trustee is generally empowered to enforce the terms of the indenture on behalf of the
bondholders
ndash In certain types of debt (general obligation bonds and traditional revenue bonds) the issuer
may forego using a trust indenture and set forth the duties of the issuer and the rights of
bondholders in the bond resolution
Important sections of the Trust Indenture
ndash Establishment of the Trust Estate for the benefit of the bondholder
ndash Authorization of Bonds and Issuing Additional Bonds
ndash Funds and Accounts for revenue Flow of Funds
ndash Covenants of the Issuer
ndash Defaults and Remedies
ndash Other sections
o Trustee related provisions
o General Provisions
o Amendments
Trust Indenture (Master and Supplemental)
12
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond Purchase Agreement (BPA) is a contract between the underwriter and the
issuer
ndash Sets forth the final terms prices and conditions upon which the underwriter agrees to
purchase a new issue of municipal securities It is a binding contract between the issuer
and the underwriter typically the underwriter provides a ldquogood faithrdquo check to assure
performance
ndash The bond purchase agreement is sometimes referred to as the ldquopurchase contractrdquo
Important sections of the BPA
ndash Bond Purchase Price and Good Faith check
ndash Delivery and Payment of the Bonds
ndash Approval of Official Statement
o Rule 15c2-12
ndash Public Offering
ndash Representation Warranties and Covenants of the Issuer
ndash Underwriters Obligations
ndash Payment of Expenses
ndash Closing conditions
ndash Form of Opinions
ndash Required Closing Certificates by major parties (Trustee Issuer Consultants)
Bond Purchase Agreement
13
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The official statement prepared by and on behalf of a municipal issuer in connection with
a new issue of municipal securities describes the essential terms of the bonds including
whether and on what terms the bonds can be redeemed prior to maturity the sources
pledged to repay the bonds the issuers covenants for the benefit of investors and much
more There are no strict requirements regarding the contents of an official statement
Includes the following major elements
ndash Maturity schedule (principal amortization and interest rate)
ndash Timing and manner of payment of the interest on and the principal of the bonds
ndash Sources from which the issuer has pledged to make payment on the bonds (eg from its
general taxing power from a specific tax or revenue source like vehicle registration fees
etc)
ndash Whether the bonds can be redeemed by the issuer prior to maturity and if so on what
terms (call features)
ndash Whether the investor has the right to require the issuer to repurchase the bonds at their
face value (put bonds)
ndash Credit enhancement bond insurance letter of credit or other guarantees that have been
provided for repayment
ndash Consequences of a payment or non-payment default by the issuer
Official Statement
14
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional sections
ndash Financial andor operating data about the issuer of the securities or any other parties who
are responsible for repayment of the bonds
o This data must be current bonds cannot be marketed with stale information
o Issuer is required to make continuing disclosure undertakings pursuant to
Rule 15c2-12 to provide annual submission of financial information
ndash Covenants of the issuer or other parties intended to protect the investors financial
interests
ndash If the bonds are issued for the purpose of funding a specific revenue-generating project
(ie toll roads) from which repayment of the bonds is to be made the official statement
generally will provide additional financial operating or other information (eg TampR study
engineering reports etc)
ndash Will contains summaries of the material terms of the relevant legal documents relating to
the bonds a copy of the legal opinion of bond counsel on the legality of the issue and the
tax treatment of the bonds for federal income tax purposes
The preliminary official statement (ldquoPOSrdquo) is a version of the official statement prepared
by or for an issuer of municipal securities for potential customers prior to the availability
of the final official statement
Official Statement (contrsquod)
15
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
The Bond resolution authorizes parameters for the sale and delivery of bonds approving
the execution and delivery of a master and supplemental indenture and appointing an
authorized officer to authorize approve and determine certain terms and provisions of
the bonds
Includes the following major elements
ndash Authorization of the issuance of bonds
ndash Delegates to an authorized officer (could be CEO CFO or other board member) to act on
behalf of the Authority to determine the final terms and conditions of the bonds Provides
limits to the issuance of bonds
o Shall not exceed a certain par amount
o Shall not exceed a certain interest rate
o Time limits as to delegation of authority
o Other parameters to ensure that the structure of the Bonds is consistent with Bond
Resolution
Bond Resolution
16
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Tab 3
Senior Lien Vehicle Registration Revenue and
Refunding Bonds Series 2013
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
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shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Security
ndash The Vehicle Registration Bonds will be secured by Pledged Revenues which include
o Vehicle Registration Fees
o All money deposited in the Pledged Revenue Fund and Debt ServiceDebt Service
Reserve Funds along with interest income
o Any asset or property delivered to the Trustee as additional security
Flow of Funds (the ldquoWaterfallrdquo)
ndash Pledged Revenue Fund
o All Additional Vehicle Registration Fees are deposited into this Fund
ndash Payment of fees to trustee
ndash Senior Lien Debt Service Fund
o 16 interest each month
o 112 principal each month
ndash Senior Lien Debt Service Reserve Fund
o Fund any deficiencies to reach Reserve Requirement
ndash General Fund
o Any lawful purpose of HCRMA
ndash General and Administrative Expenses for HCRMA
ndash Other Project Related Expenses for SH 365 and IBTC
Security and Flow of Funds
18
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Additional Bonds Test
ndash Senior lien bonds
o 150x historical coverage on outstanding and additional senior lien bonds
Inferior Liens
ndash The Authority is able to issue additional bonds under an inferior or subordinate lien of
Pledged Revenues
Debt Service Reserve Fund Requirements for Senior Lien Bonds Lesser of
ndash (i) the maximum Annual Debt Service
ndash (ii) 125 times the Average Annual Debt Service
ndash (iii) 10 of the aggregate amount of Outstanding Bonds
Optional Redemption
ndash Senior lien bonds optional par call at September 1 2023
Additional Provisions
19
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Senior Lien Vehicle Registration
Revenue and Refunding Bonds
Series 2013
ndash Fixed Rate Tax Exempt Current
Interest Bonds
ndash True Interest Cost 469
ndash Pro Forma minimum coverage
135x
ndash Par Amount $60655000
ndash Maturities 2014-2043
ndash Refunds First National Line of
Credit
ndash Cash funded Debt Service
Reserve Fund
Plan of Finance
20
SOURCES Amount
Par Amount $60655000
Premium 1549213
Total $62204213
USES Amount
Project Fund 45985822
Debt Service Reserve Fund 3890431
Costs of Issuance 685500
Underwriterrsquos Discount 344459
Line of Credit Takeout 11300000
Total 62204213
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Tab 4
Appendix
H I D A L G O C O U N T Y R E G I O N A L M O B I L I T Y A U T H O R I T Y
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Sources of Funding
Credit Background for SH 365 Financing Sources
Financing Schedule
Appendix
22
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
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shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
IBTC Project Sources and Uses ($Millions)
23
SOURCES A mount Notes
Vehicle Registration Bond Proceeds 1128 Financing in 4Q 2013
Toll Revenue (Senior Lien) Bonds 2585 Financing in mid 2017
Toll Revenue (TIFIA) Proceeds 2550 Financing in mid 2017
Cash 524
Total 6787
USES A mount Notes
Project Cost 23154 Pre-development and
construction
Reserve fund and financing costs 598 For all 3 transactions
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
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INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
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I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Member FINRA amp SIPC copy 2013
First Southwest Company
HI
DA
LG
O
CO
UN
TY
R
EG
IO
NA
L
MO
BI
LI
TY
A
UT
HO
RI
TY
Task Timing
Ongoing work on bond documents early-mid September
Board to approve transaction underwriting syndicate
underwriterrsquos counsel September 18
Finalize all bond offering documents late September
Rating agency presentations early October
Receive ratings mid October
Post Preliminary Official Statement mid October
Investor roadshow (if needed) mid October
Pre-marketing period mid-late October
Pricing late October
Distribute Official Statement early November
Closing late November
Financing Schedule ndash What Happens After The Retreat
26
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Item 2B
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2B
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 2 Agenda Item RESOLUTION 2013-28 ndash AUTHORIZATION TO ESTABLISH A LOCAL
GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for staff to establish a local government fund investment pool
account with TexSTAR 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-28 ndash Authorization to establish
a local government fund investment pool account with TexSTAR 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Memorandum To Dennis Burleson Chairman
From Jerry Dale CGFO Chief Financial Officer
Date August 27 2013
Re Authorization to establish a Local Government Fund Investment Pool Account with TexSTAR
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the first National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Its yields have run consistently within the range of TEXPOOL TexSTAR is currently paying about 5 basis points Goal Staff is requesting authorization to participate in TexSTAR Program TexSTAR has a short term pool that particularly meets the PFIArsquos objective of safety liquidity and yield objectivesmdashin that order of priority Information about TexSTAR is included And a representative is expected to attend the Board meeting to address any questions the Board may have Options The application to participate in TexSTAR may be disapproved however the safety liquidity and yield objectives of the HCRMArsquos cash may be placed at risk Recommendation Based on review by this office approval of resolution authorizing participation in TexSTAR is recommended A copy of the application form is also attached If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-28
RESOLUTION AUTHORIZING THE ESTABLISHMENT OF A LOCAL GOVERNMENT FUND INVESTMENT POOL ACCOUNT WITH TEXSTAR
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS the Authority has determined it has become necessary to establish a local
government fund investment pool account with TexSTAR to manage the Authorityrsquos cash in compliance with HCRMA Investment Policy and the Public Funds Investment Act and
NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the establishment of a local government fund pool account with TexSTAR Section 3 The Board authorizes the Chief Financial Officer and the Executive Director to establish and manage the TexSTAR account
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Welcome to TexSTAR the premier investment service for Texas local governments
TexSTAR was created by Texas local government officials with a distinct understanding of the specific needs and challenges of investing public funds
TexSTAR is administered by First Southwest Company and JPMorgan Asset Management Together these organizations bring to the TexSTAR program the powerful partnership of two leaders in financial services with a proven track record in local government investment pool management
TexSTAR is a conservatively managed investment vehicle rated AAAm by Standard amp Poors and operated in full compliance with the Texas Public Funds Investment Act The TexSTAR Cash Reserve Fund invests in US treasury and agency secu rities and repurchase agreements fully collateralized with US government and agency securities The Cash Reserve Fund does not allow for investment in commercial paper or money market funds
TexSTAR participants have access to a Texas-based personalized customer service staff with extensive experience in servicing state and local government entities In addition TexSTAR utilizes a proven operating platform providing internet transaction systems with extended transaction deadlines until 4 pm for same and next day settlement
We look forward demonstrating how TexSTAR will fulfill and enhance your cash management needs
TexSTAR Participant Services First Southwest Company
325 North St Paul Street Suite 800 Dallas Texas 75201
1-800-839-7827 wwwtexstarorg
E-mail texstarfirstswcom
JPMorganFirstSouthwest~ Asset Management
I
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR ENROLLMENT STEPS
In order for a governmental entity to enroll in TEXSTAR the following procedures should be performed
1 Submit the Resolution in the form entitled Application for Participation in TexSTAR to the entitys governing body for approval
2 Complete the Application for Participation in TEXSTAR
3 Complete a Bank Instruction Form for each account to be opened
4 Send all completed documentation with original signatures and an approved investment policy of the enrolling entity to
TEXSTAR Participant Services First Southwest Company
325 North SI Paul Street Suite 800 Dallas Texas 75201
5 Enrollment documentation will ordinarily be processed within five (5) business days of receipt
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR~
APPLICATION FOR PARTICIPATION IN TEXSTAR
The undersigned local government (Applicant) applies and agrees 10 become a Participant in Ihe Texas Short Term Asset Reserve Program (lEXSTAR)
1 Authorization The governing body of Applicant has duly authorize( this application by adopting Ihe forrowing resolution al a meeting of such governing body duly called noticed and held in accordance with the Texas Open Meellng Law chapter 551 TelC8s Government Code on 20_
WHEREAS il is in Ihe best interesls of this governmental unit (Applicenf) to invest its tuncls joinUy with other Texas local governments in Ihe Texas Short Term Assel Reserve Program (lEXSTAR) in order bette r to preserve and safeguard the principal and liquidity of such funds and 10 earn an acceptable yield and
WHEREAS Appl icant is authorized to invest its public funds and funds under ils control in TEXSTAR and to enter into lhe participation agreement authorized herein
Now THEREFORE BE IT ReSOLVED THAT
SeCTION 1 The form of application for participation in TEXSTAR anaChed to this resolution is approved The offICers of Applicant specified in the application are authorized to e)(ecute and submit the application to open accounts to depOSil and withdraw funds to agree 10 the terms for use of the website for online transactions to designate other authorized representatives and to lake all other ldion required Of permitled by Applicant under the Agreement created by the application all in the name and on behalf of Applicant
SECTION 2 This resolution will continue in full force and effect until amended or revoked by Applicant and written notice of the amendment or revocation is delivered to the TEXST AR Board
SeCTION 3 Terms used in this resolution have the meanings given to them by the application
2 Agreement Applicant ag rees with o lher TEX STAR Participants and the TexSTAR Board to the Terms and Conditions of Participation in TEXSTAR effective on this date which are incorporated herein by reference Applicant makes the representations designations delegations and representations described in the Terms and Conditions of Participation
3 Taxpayer Identifi cation Number Applicants ta)(payer identification number is 26-2761494
APPlicant physical address (i f different) ______ _____ _________ _ ____
Applicant main phone nmbe -(956-)_4~0c2=--_4=_7~6c2=_______ __________
Applicants main fax nmOe (956) 402-4762 ~~-------------------------------
5 Authorized Representatives EaCh or the following Participant officials is designated as Participants Authorized Representative authorized to give notices and instructions to the Board in accordance with the Agreement the Bylaws the Investment Policy and the Operating Procedures
1 Name Jerry W Dale Title Chief Financial Officer
Signale ___________ Phone (956) 536-6983
Emn jdalemcaliennet
J
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
-------------------
2 Name Pilar Rodriguez Tille Executive Director
S~nat ____________PhoO (956) 402-4762
EmI prodriguezhcrmanet
3 Name _ _ ______________TiUe________________
Signature _______________Phone ________ _______
Email ________ _______
4 Name _________ ____ ___ Title ________________
Signalure _ ______________Phone ______ _________
Email ______________
REQUIRED) PRMARY CONTACT List the name of the Authoriled Representative listed above that will be designated as the Primary Contact and will receive all TexSTAR correspondence inclvding transaction confirmations and monthly statements
Name Jerry W Dale
(OPTIONAL) INQUIRY ONLY CONTACT In additioo the following additional Participant representative (no t IIsred above) is designated as an Inquiry Only Representative authorized to obtain account inf()(malion
Name Flor Koll Tille Program Administrator
s~ Phon (956) 402-4762
Em fkollhcrma net
Applicant may designate other authorized representatives by written instrument signed by an existing Applicant Authofized ReJ)(esentative or Applicants Chief executive officer
DATED _______
REQUIRED Hidalgo County Regional Mobility Authority PLACE OFFICIAL SEAL OF ENTITY HERE (NAME OF ENTITYAPPLICANT)
SIGNED BY
(Signature of offICial)
Dennis Burleson Chairman
(Printed name and title)
ATTESTEO BY
(Signature of official)
Ricardo Perez SecretaryTreasurer
(Printed name and title)
FOR INTERNAL USE ONLY APPROVED AND ACCEPTEO TE XAS SHORT TERM ASSET RUERvr fUH()
AUTHORIZED SIGNER V082011 2
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
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Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
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D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
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11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
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factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
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bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
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of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
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maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
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Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
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equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR
INFORMATION STATEMENT
(CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Table of Contents
Organization and Structure 1
Public Funds Investment Act Disclosure Items 1
Understanding Risks Associated with Investing in TEXSTAR 4
Administration of TEXSTAR 5
PMicipation in TEXS TAR 8
Summary of Operating Procedures 8
No person or entity has been authorized to provide or communicate any information or to make any representations other than those contained in this Information Statement and if given or made such other information or representations must not be relied upon as having been authorized by TEXSTAR its Board of Directors the program administrators or any agent of the foregoing The attachments are part of this Information Statement The information contained in this document is subject to change without prior notice
The TexSTAR Information Statement should be read carefully before investing Investors should consider the investment objectives risks charges and expenses associated with this or any security prior to investing Investments in TexSTAR are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and although TexSTAR seeks to preserve the value of the investment at a fixed price it is possible to lose money by investing in the fund For further information contact TexSTAR Participant Services at (800) 839-7827
TexSTAR is distributed by First Southwest Company a registered broker dealer member FINRAISIPC If you have any questions regarding this material please contact
TEXSTAR Participant Services cia First Southwest Company 325 North St Paul Suite 800
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
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Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR shy
Organization and Structure
Texas Short Term Asset Reserve Program (TEXSTAR) has been organized in conformity with the Interlocal Cooperation Act Chapter 791 of the Texas Government Code and the Public Funds Investment Act Chapter 2256 of the Texas Government Code (the qPFIA) These two acts provide for the creation of public funds investment pools (including TEXSTAR) and authorize eligible governmental entities (Participants) to invest their public funds and funds under their control through the investment pools
JP Morgan Investment Management Inc ( JPMIM or the investment manager-) and First Southwest Company (FSC) serve as co-administrators for lEXSTAR under an agreement with the TEXSTAR board of directors (the -Board) JPMIM provides investment management services and FSC provides participant services and marketing Custodial fund accounting and depository services are provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (UBFDSmiddot or the Transfer Agent) Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
The Board may establish separate Funds within TEXSTAR from time to time Participants choose the Funds in which their deposits are invested Participants assets in the Funds are represented by units of beneficial interest runits) The Board may issue an unlimited number of units in each Fund
This Information Statement provides information relating to investments in the TexSTAR Cash Reserve Fund (the ~Fundmiddot)
Public Funds Investment Act Disclosure Items
Section 2256016 of the Public Funds Investment Act requires investment pools to provide an information statement to the investment officer or other authorized representative of an investing entity This section provides the required information for TEXSTAR
1 Objectives of TEXSTAR The primary objectives of TEXSTAR are in order of priority preservation and protection of principal maintenance of sufficient liquidity to meet Participants needs diversification to avoid unreasonable or avoidable risks and yield There is no sales charge and no investment minimum TEXSTAR will invest only in instruments authorized under both the Public Funds Investment Act and the current TEXSTAR Investment Policy See lIem 2 of this section for a description of authorized TEXSTAR investments
As a secondary objective to safety and liquidity the Fund will be directed toward achieving a competitive rate of return for Participants Efforts will be made to minimize market and credit risk through investment diversification
2 Types of Investments Authorized for TEXSTAR Cash Reserve Fund The investment policies and composition guidelines for the TEXSTAR Cash Reserve Fund are summarized below The TEXSTAR Investment Policy restricts investment of the Fund portfolio as follows
556532454
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR
Authorized Investments
A Obligations of or guaranteed or insured by the United States Government or its agencies and instrumentalities with a maximum final stated maturity limited to 397 days for fixed rate securities and 24 months for variable rate notes
B Fully collateralized repurchase agreements and reverse repurchase agreements with a defined termination date not to exceed 95 calendar days with respect to repurchase agreements and 90 days with respect to reverse repurchase agreements (unless the repurchase agreement has a put option that allows the fund to liquidate the position at principal plus accrued interest with no more than 7 days notice to the cQunterparty) and secured by cash or any obligation the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or its instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation The repurchase and reverse repurchase agreements must be placed with primary government securities dealers andor financial institutions doing business in the State of Texas
Prohibited Investments
The TEXSTAR Cash Reserve Fund will not invest in
A Derivatives which include instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-on-one basis to the associated index or market
8 Commercial paper
C Certificates of deposit
D Money market mutual funds
Diversification Guidelines
Specific Fund diversification limitations govern investments of the TEXSTAR Cash Reserve Fund portfolio applied at the time of purchase
A 100 of the Fund may be invested in obligations of the United States or its agencies or instrumentalities
B 100 of the Fund may be invested in direct repurchase agreements Not more than 25 of the Fund may be invested in term repurchase agreements
C Reverse repurchase agreements will be used primarily 10 enhance Fund return and may not total more than one-third (13) of the total Fund assets
556582454 2
s
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR -
D A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
3 Maximum Average DollarmiddotWeighted Maturity The dollar weighted average maturity 01 the TEXSTAR Cash Reserve Fund portfolio may not exceed (1) sixty (60) days calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rate reset date for variable or floating rate securities or (2) ninety (90) days calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made
4 Maximum Stated Maturity Date The maximum stated maturity for any securities that are obligations of or guaranteed or insured by the United States its agencies or instrumentalities in the TEXSTAR Cash Reserve Fund portfolio is limited to 397 days for fixed rate securities and 24 months for variable rate notes
5 Size of the Pool The current size of the TexSTAR Cash Reserve Fund is provided in the TEXSTAR monthly newsletter on the TexSTAR website at wwwlexstarorq or by contacting TEXSTAR Par1icipant Services A copy of the most recent newsletter may be obtained in connection with and in addition to this Information Statement
6 TEXSTAR Advisory Board Section 2256016(g)1) of the Public Funds Investment Act requires TEXSTAR to establish and maintain an advisory board composed of Participants in TEXSTAR and other persons who do not have a business relationship with TEXSTAR Members are appointed and serve at the will of the Board The names of the Advisory Board members are available on the TexSTAR website at wwwtexstarorg
7 Custodian and Transfer Agent for TEXSTAR JPMorgan Chase Bank NA serves as custodian to TEXSTAR and BFDS serves as transfer agent to TexSTAR The transfer agent will receive and disburse all Participant deposits and withdrawals and the custodian will settle all Fund trades safekeep securities and collect all income or any other payments due in connection with purchased securities for TEXSTAR
8 Net Asset Value The TEXSTAR Cash Reserve Fund seeks to maintain a net asset value of $100 per unit (rounded to the nearest whole cent) and is designed to be used by Participants for investment of funds that require daily liquidity availability
9 Source of Payment The only source of payment to Participants is the market value of the assets of the TEXSTAR Fund in which they invest and the income and profits derived from those assets There is no secondary source of payment such as insurance or guarantees
10 Independent Auditor TEXSTAR is subject to annual review by an independent auditor consistent with the Public Funds Investment Act PricewaterhouseCoopers LLP has been retained to provide independent auditing services for TEXSTAR 115 address is 1201 Louisiana Street Suite 2900 Houston Texas 77002
J
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR -
11 Operating Procedures Deposits and withdrawals may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures The requirements for TEXSTAR deposits and withdrawals deadlines and other operating procedures are summarized under the section entitled Summary of Operating Procedures later in this Information Statement
12 Performance History The performance history including yield weighted average maturity expense ralios and average balance for the TEXSTAR Cash Reserve Fund are available on the TexSTAR website at WNWtexstarorg
13 Co~Administrators JP Morgan Investment Management Inc (JPMIM) and First Southwest Company (FSC) serve as Co-Administrators for TEXSTAR JPMIM provides investment management services and FSC provides participant and marketing services for TexSTAR Custodial fund accounting and depository services afe provided by JPMorgan Chase Bank NA andlor its subsidiary JP Morgan Investor Services Co Transfer agency services are provided by Boston Financial Data Services Inc (BFDS) JPMIM is an asset management subsidiary of JPMorgan Chase amp Co a leading global financial services company and is one of the largest asset managers worldwide Founded in 1946 Texas based-FSC is a registered broker dealer member of the Financial Industry Regulatory Authority (FINRA~) Municipal Securities Rulemaking Board (MSRB) and Securities Investor Protection Corporation (SIPC-) FSC is consistently ranked as one of the nations leading providers of financial advisory and underwriting services and maintains a dominant presence in the Southwest and Texas The ultimate parent company of FSC is Hilltop Holdings Inc JPMIM and FSC have e)(tensive experience with the investment management and administration of local government investment pools respectively They provide investment services and administration to the Board under a contract that may be extended periodically to a term of two years or less They may be replaced by the Board for cause and they may resign Unless their replacements are affiliates any replacements must be approved by Participants owning two-thirds of the units in TEXSTAR JPMorgan Chase Bank NA the TEXSTAR custodian is the principal banking affiliate of JPMorgan Chase amp Co Each of JPMIM FSC BFDS and JPMorgan Chase Bank NA may provide certain services including those described herein through the use of subcontractors or delegates
Understanding the Risks Associated with Investing in TExSTAR
Unlike money market mutual funds which are registered with the Securities and Exchange Commission TexSTAR operates in compliance with the PFIA and not with Rule 2a-7 of the Investment Company Act of 1940
Before making an investment decision each Participant should consider the applicable risks including the following in determining whether any investment including TEXSTAR is appropriate
bull Credit Risk Credit risk is the possibility that the issuer of a security will fail to make timely payments of interest or principal In general the lower the credit quality of a security the higher the yield and the higher the element of credit risk all other
SS65825 4 4
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
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TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
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11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
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municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
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TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
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IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
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Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
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DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
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Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR shy
factors being equal In an attempt to minimize credit risk the TEXSTAR investment policy allows investment of the TEXSTAR Cash Reserve Fund only in the obligations described above
The credit risk associated with investments in direct obligations of the United States is considered low by most authoritative sources Obligations issued or guaranteed by many Federal agencies or government-sponsored enterprises are not direct obligations of the United States and offer more varied credit risk Noting that the United States government is not obligated to provide support or guarantees to its instrumentalities TEXSTARs investment manager will invest in obligations issued by an agency or instrumentality only after conducting appropriate credit risk analysis and believing that any credit risk with respect to the issuer is minimal
TEXSTARs investment manager will also invest in repurchase agreements and reverse repurchase agreements documented by a Master Repurchase Agreement in form approved by The Securities Industry and Financial Market Association (SIFMA) and collateralized by cash or obligations the principal and interest of which are unconditionally guaranteed or insured by or backed by the full faith and credit of the United States and its agencies and instrumentalities including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation Repurchase agreement and reverse repurchase agreement transactions will be placed with an approved primary government securities dealers or financial institutions doing business in the State of Texas and proceeds received under reverse repurchase agreements will be reinvested in securities with the same maturity as the term of the reverse agreement
bull Market Risk Market risk is the potential for a decline in market value generally due to but not limited exclusively to rising interest rates For example a bond or other security issued or backed by the United States government is guaranteed only as to the timely payment of interest and principal its market price on any given day is not guaranteed and will fluctuate in value as market perceptions market conditions and interest rates change In general the market value of a bond varies inversely with interest rates If interest rates rise then market values fall If interest rates fall then market values rise Also the volatility and related market values typically flu ctuate more for longer-term securities than for shorter-term securities
Restrictions on dollar weighted average maturity and maximum stated maturity for the Fund are used in an attempt to minimize certain market risks TexSTARs investment manager will maintain the dollar weighted average maturity of the Fund at sixty (60) days or less and the maximum stated maturity for any obligation of the United States its agencies or instrumentalities in the TexSTAR Cash Reserve Fund portfolio is limited to 397 days tor fixed rate securities and 24 months for variable rate notes TexSTAR will seek to maintain a stable $100 net asset value (NAV) per unit (rounded to the nearest whole cent) The Comiddot Administrators have policies and procedures in place to monitor the Funds NAV These limitations are designed to attempt to minimize market risk II must be noted that the value of the TexSTAR Cash Reserve Fund portfolio is dependent on timely receipt of principal and interest payments from the issuers of the respective investment securities Any delays or failures in receipt of payments can and will have detrimental effects on the value of the Funds portfolio and may cause loss of principal and interest to any Participant
5 556582454
I
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR -
bull Temporary Cash Holdings To respond to unusual market conditions in a prudent manner TexSTAR may be required to hold all or most of its total assets in cash including for the purpose of assuring sufficient liquidity or due to the lack of eligible securities among other circumstances This may result in a lower yield and prevent the Fund portfolio from meeting all its investment objectives
Administration of TEXSTAR
bull TEXSTAR Board By executing and submitting an application to open an account a Participant designates the Board as its agent for investing deposited funds The Board holds legal title to all money investments and assets and has the authority to employ personnel contract for services and engage in other administrative acti vities necessary or convenient to accomplish the objectives of TEXSTAR
The business and affairs of TEXSTAR are managed by the Board in accordance with its bylaws (the Bylaws) The Bylaws set forth procedures governing the selection of and action taken by the Board Board oversight of TEXSTAR is maintained through various reporting requirements
The Bylaws provide for a five-member Board consisting of three representatives of Participants and one member designated by each of the co-administrators Board members serve for staggered three-year terms Replacement Board members (other than the co-administrator representatives) are appointed by the Board and may be replaced by directors elected by the Participants in accordance with the Bylaws Board members serve without compensation but are entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of Board duties The names terms and affiliations of Board members are listed on the TEXSTAR website
bull Investment Management TEXSTARs Board has adopted (and will review and revise at least annually) a list of brokers that are authorized to engage in investment transact ions with TEXSTAR Before a broker may be added to the list a qualified representative of the broker must certify that the broker has read the TEXSTAR Investment Policy and has implemented reasonable procedures and controls to preclude investment transactions conducted between the broker and TEXSTAR that are not authorized by the TEXSTAR Investment Policy other than by reason of portfolio-wide diversification requirements or subjective standards
The investment manager may dispose of securities without regard to the time they have been held when such actions for defensive or other Fund management reasons appear advisable Investments may be sold by one Fund to another Fund at prevailing market prices
All securities purchased on behalf of TexSTAR must be delivered versus payment to the custodian bank for TexSTAR All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping receipts to the Custodian The Custodian shall keep accurate records reflecting
556581454 6
11
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAA shy
TexSTARs ownership of the securities Money market fund accounts must be in the name of TexSTAR
bull Ratings In compliance with Section 2256016(h) of the Public Funds Investment Act TEXSTAR wi operate to maintain a AAA AAAmiddotm or equivalent rating for the Fund from at least one nationally recognized rating agency As of the date hereof the Fund was rated AAAm by Standard and Poors Rating Service An explanation of the significance of such rating may be obtained from Standard amp Poors at 1221 Avenue of the Americas New York New York 10020 Promptly upon notice TEXSTAR will post on its website any change to the Funds rating
bull Calculation of Yields Each day TEXSTAR determines the net interest income for each Fund for that day The net interest income is determined by adjusting TEXSTARs accrued interest for that day by the amortization of any premiums andor the accretion of any discounts daily service fee and any gains or losses from the sale of securities TEXSTARs daily interest rate will be determined by dividing the net interest income for that day by the total balance (including all cash and securities) available for investment of the applicable Fund for that day The resulting rate will then be used to determine the amount of interest income to distribute to each Participants account Interest income accrued during the month is credited to each Participants account at the end of the month and is reinvested unless the Participant provides specific instructions for its withdrawal or transfer
bull Valuation of TEXSTAR Assets So long as the Fund continues to utilize amortized accounting although all securities are marked to market daily using the fair value method amortized cost which generally approximates the market value of the securities has been deemed to be a proxy for fair value The stated objective of TEXSTAR is to maintain a stable $100 per unit net asset value (rounded to the nearest whole cent) however the $100 net asset value is not guaranteed or insured by TEXSTAR its Board the Co-Administrators their agents or any governmental or other entity There can be no assurance Ihal the Fund portfolio will maintain a stable net asset value of $100 As stated above all TEXSTAR securities will be marked to market on a daily basis If upon a daily calculation the Co-Administrators find that the deviation between the amortized cost and markel-determined values or the deviation between market-determined values and $1 00 per unit of the PortfOlios assets exceeds $00030 Ihey shall promptly notify the Board In the event that Ihe deviation from amortized cost or the deviation between market-determined values and $100 per unit exceeds $00040 the Board shall direct the investment manager to take such action jf any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants However absent contrary instructions the investment manager wi ll promptly sell portfolio holdings to attempt to bring the deviation back within the desired value band The Board in its discretion may elect to cease utilization of amortized accounting and to utilize the fair value method at any time To the extent that the Board elects to utilize a net asset value per unit delermined by using available market quotations in lieu of amortized accounting the Fund will reflect market fluctuations and any unrealized gains and losses resulting from those fluctuations on a daily basis
bull Eth ics and Conflicts of Interest The Co-Administrators staff must refrain from personal business activity Ihat conflicts with the proper execution and management
SS6SS24S4 7
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAA bull
of the investment program or that could impair their ability to make impartial decisions TEXSTAR may purchase investments from the Co-Administrators or their affiliates only on terms and conditions approved by a majority of the Participant members of the Board The Co-Administrators must implement policies and procedures to comply with these restrictions
Agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with TEXSTAR must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds subject to the foregoing As stated in the TEXSTAR Investment Policy a conflict of interest refers to any situation in which the Board determines at its sole discretion that the duties of the agent advisor or contractor under its contract with TEXSTAR are or may become inconsistent with the interests or other duties of the agent advisor or contractor
bull Fees and Expenses In return for contracted service TEXSTAR has agreed to pay service fees to the co-administrators and custodian totaling twelve (12) basis points per year calculated daily on the total fund balances The co-administrators may (but are not obligated to) waive all or a portion of their fees from time to time The service fees cover all normal services provided to the Board by the co-administrators and custodian Additional expenses required to attain TEXSTAR objectives and conduct on-going operations will be incurred by TEXSTAR These include expenses for independent auditors legal representation liability insurance board meeting attendance and rating s
The TEXSTAR service fee and oth er expenses are deducted from the gross interest earnings daily and charged monthly There is no direct reduction to the Participant s principal account related to the payment of fees and expenses but only the remaining net income after deduction of the applicable fees and expenses is credited to the Participants account All TeXSTAR rates are quoted net of fees and expenses There are no hidden costs or additional reductions to Part icipants accounts In the event a Fund does not earn adequate interest income and profits to cover allocable expenses and fees for a given month or period the deficit will be carried over to future months or periods when adequate income and profits have been received
bull Liability TEXSTAR directors and officers will not be liable for (and TEXSTAR earnings may be applied to indemnify them against) loss and liability that may arise from or in connection with any of their acts or omissions including acts and omissions caused by their negligence to the extent permiHed by law
Participation in TEXSTAR
Participation in TEXSTAR is limited to eligible governmental entities that have authorized executed and submitted an application to participate in TEXSTAR
bull Eligibility to Invest Only eligible local governments and agencies of the State of Texas may become Participants Elig ible local governments include any
556582454
s
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
municipality school district county special district junior college district or other legally constituted political subdivision of the Slate or a combination of political subdivisions (eg a combination by means of an interlocal agreement) Eligible state agencies include (a) a department board bureau commission court office authority councilor institution of the state (b) a university college or any service or part of a state institution of higher education and (c) a statewide job or employment training program for disadvantaged youths thai is substantially financed by federal funds and was created by execution order not tater than December 30 1986 Each state agency must have authority under state law to invest its funds in the Pool and in investments authorized by the Public Funds Investment Act
bull Establishment of Accounts To participate in TEXSTAR an eligible local government or state agency must duly authorize complete execute and submit an application for participation By executing and submitting an application a Participant agrees to the terms and conditions governing TEXSTAR as well as its Bylaws Investment Policy and Operating Procedures Application forms (including forms of authorizing resolutions) may be obtained from TEXSTAR Participant Services In their applications Participants must designate authorized representatives who have authority to transfer funds for investment to withdraw funds to issue letters of instructions and to take all other actions necessary or appropriate for the investment of funds in TEXSTAR A Participant must also provide a separate bank information sheet for each account and sub-account signed by two authorized Participant representatives unless otherwise permitted by the Operating Procedures The Operating Procedures describe in detail the procedures required for the establishment of accounts) deposits to and withdrawals from TEXSTAR and related information A copy of the Operating Procedures may be obtained from TEXSTAR Participant Services
bull Amendments The Board may amend the TEXSTAR terms and conditions Bylaws Investment Policy and Operating Procedures It must give Participants at least 30 days advance notice of each amendment Participants are deemed to have accepted the amendments unless they withdraw from TEXSTAR before the amendments are effective
Summary of Operating Procedures
Oeposits to and withdrawals from TEXSTAR may be made by wire transfer or automated clearinghouse (ACH) transfer according to established operating procedures Excerpts from the current Operating Procedures are provided below
bull Wire Transfers Wire transfer requests will be executed on the same day as initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any wire transaction requests by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant Services Representative All incoming wire deposits must be received by 400 pm CST to earn interest for that day In addition any wire deposits received after 400 pm CST will not be invested until the following business day Outgoing wire transfers from TEXSTAR received by the transfer agent by 1030 am are typically sent for processing between 1200 noon and 1230 pm central time
5565324 5 4 9
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
TexSTAR -shy
Some delay may occur depending on unforeseen circumstances induding but not limited to delays or failures unrelated to TExSTAR
TEXSTAR reserves the right to suspend the right of withdrawal or to postpone th e date of payment in the event thai the Federal Reserve is closed other than for customary weekend and holiday closings in the event of a general suspension of trading in any securities market which affects TEXSTAR operations or if in the opinion of the Board an emergency exists so that the disposal of TEXSTARs securities or determination of its net asset value is not reasonably practical
TEXSTAR will process deposits and withdrawal requests only on the days the Federal Reserve is open for business TEXSTAR may also be closed or have limited trading hours on any Friday preceding or Monday following a weekend which includes a national holiday provided that notice has been given to Participants at least 30 days prior to such a day or whenever The Bond Market Association recommends that markets for fixed income securities close
bull Automated Clearing House (ACH) Transfers ACH transaction requests will be executed on the business day following the date the transaction was initiated if requested in accordance with the daily transaction deadlines for the pool TEXSTAR must be notified of any next day ACH transaction requests by 400 pm CST if using the pools internel transaction system or by 330 pm CST when contacting a Participant Services Representative for all ACH transfer activity one day prior to the actual settlement of the funds ACH transfer withdrawals are sent in accordance with the prearranged Participant information as provided on the bank information sheet corresponding to that specific TEXSTAR account or subaccount In the event of an ACH rejection TEXSTAR will contact the Participant to confirm the rejection TEXSTAR will crediUdebit the Participants account accordingly
bull Account to Account Transfers Funds may be transferred between Tex-STAR accounts in the same Fund without transferring the money to the Participants local bank Transactions transferring funds between accounts will be executed as of the close of business on the same day as initiated if received by the deadline TexSTAR must be notified of any same day interaccount transaction activity by 400 pm CST if using the pools internet transaction system or by 330 pm CST when contacting a Participant SelVtces Representative
bull Methods of Notification Participants may notify TEXSTAR of wi re transfer or ACH activity by
a Internet access system or
b Verbal notification to a TEXSTAR Participant SelVices representative followed by a fax confirmation
bull Reports A Participants monthly statement will be mailed within the first five (5) business days of the respective succeeding month The monthly statement will include a detailed listing of the balance in the Participants accounts as of the date of the statement all account activity for the previous month including deposits and withdrawals daily and monthly yield information and any special fees and expenses charged to the Participant Additionally copies of the Participants reports will be
55658245 10
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
maintained and made available for a minimum of three prior TEXSTAR fiscal years in either physical or electronic form
A complete copy of the TEXSTAR Operating Procedures may be obtained by contacting TEXSTAR Participant Services
January 2013
55658245 4 II
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
INVESTMENT POLICY (CASH RESERVE FUND)
The Premier Investment Service for Texas Local Governments
SS6SSN U
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
I STATEMENT OF PURPOSE AND OBJECTIVE
ORGANIZAliON
The Texas Short Term Asset Reserve Fund (~ TexSTARJ is a local government investment pool organized under the authority of the Interlocal Cooperation Act Chapter 791 Texas Government Code and the Public Funds Investment Act Chapter 2256 Texas Government Code TEXSTAR was created in April 2002 by contract among its participating governmental units and is governed by a board of directors (the Boarer) JP Morgan Investment Management Inc rJPMIM or the -investment managermiddot) and First Southwest Asset Management Inc (FSAM) serve as co-administrators for TEXSTAR under an agreement with the TEXSTAR board of directors (the Board) JPMIM provides investment management services and FSAM provides participant services and marketing Custodial transfer agency fund accounting and depository services are provided by JPMorgan Chase Bank NA andor its subsidiary JP Morgan Investor Services Co
OBJECTIVE
The purpose of TEXSTAR is to offer a safe efficient and liquid investment alternat ive to local governments in the State of Texas so thai they may benefit from and realize a higher investment return by utilizing economies of scale and professional investment expertise It is the policy of TEXSTAR to invest pooled assets in a manner which will provide for preservation and safety of principal and competitive investment returns while meeting the daily liquidity needs of the participants Specifically the primary investment objecti ves of TEXSTAR n order of priority are
bull preservation of capital and protection of principal bull safety of funds and investments bull maintenance of sufficient liquidity bull diversification to avoid unreasonable or avoidable risks and
bull yield
Th is Investment Policy establishes investment strategies policies and procedures intended to assure that these objectives are met
FUNDS
The Board may establish separate Funds with separate investment portfolios within TEXSTAR from time to time Initially TEXSTAR will maintain a Cash Reserve Fund and a Prime Fund Unless otherwise stated this Investment Policy applies to the Cash Reserve Fund
II STANOARD OF CARE
The TexSTAR Cash Reserve Fund shall be designed and managed in accordance with the following prudent person standard of care
5S6S824 12
2
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Investments shall be made with the judgment and care under prevailing circumstances that a person of prudence discretion and intelligence would exercise in the management of the persons own affairs not for speculation but for investment considering the probable safety of capital as well as the probable income to be derived
This prudent person standard shall apply to the management of all TexSTAR Funds
III AUTHORIZED INVESTMENTS
The T ex STAR Cash Reserve Fund shall be invested only in the following
GOVERNMENT SECURITIES
The Fund may be invested in obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities except the following
1 Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal
2 Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest
3 Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years and
4 Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
The Fund may be invested in fully collateraliZed repurchase agreements having a defined termination date and secured by the delivery of obligations of the United States or its agencies or instrumental ities including mortgage-backed securities TEXSTAR may also borrow against its investments through a reverse repurchase agreement meeting the foregoing standards and the other conditions described herein The repurchase and reverse repurchase agreement transactions shall be placed only with primary government securities dealers as recognized by the Federal Reserve or finanCial institutions doing business in the State of Texas All such transactions must be governed by a master repurchase agreement in form approved by The Securities Industry and Financial Market Association (SIFMAR)
556SR2412 J
to
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
IV PROHIBITEO INVESTMENTS
The TEXSTAR Cash Reserve Fund may not be invested in commercial paper
The TexSTAR Cash Reserve Fund may not be invested in derivatives
For the purposes of this Investment Policy the definition of derivatives includes instruments which have embedded features that alter their character or income stream or allow holders to hedge or speculate on a market or spreads between markets that are external to the issuer or are not correlated on a one-Io-one basis to the associated index or market
Prohibited derivatives include the following
1 Arrangements in which an investor has swapped the natural cash flows or some portion of the natural cash flows of an instrument for a different set of cash flows (Le interest rate swaps)
2 Over-the-counterexchange-traded options or futures (ie option contracts futu res contracts etc)
3 The following instruments collateralized mortgage obligations inverse noating rate notes range index notes non-money market index-based notes dual index notes index amortizing notes inverse multi-index bonds stepped inverse index bonds and inverse index bonds
Instruments that are not considered derivatives by the preceding definition and are authorized investments if described in Part III are as follows
Treasury bills Treasury notes Treasury bonds Treasury strips repurchase agreements agency notes with a defined maturity and fi)(ed coupon rate money market index variable rate notes (ie floating rate notes tied to money market indices such as three- or sixshymonth Treasury bills one- three- and six-month London Interbank Offering Rate [LlBOR) federal funds the one-year constant maturity Treasury rate or a prime rate or a commercial paper composite rate) and step-up notes
In addition to commercial paper and derivatives the TexSTAR Cash Reserve Fund may not invest in certificates of deposit money market mutual funds or any other investments that are not authorized by Part III
V POLICY GUIDELINES ANO STRATEGY
PORTFOLIO STRUCTURE AND COMPOSITION
The TexSTAR Cash Reserve Fund portfolio shall be designed and managed to ensure that it will meet all the requirements necessary to maintain a AAAm rating (or the
556582412 4
1
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
equivalent) by a nationally recognized investment rating firm The weighted average maturity of the TexSTAR Cash Reserve Fund portfolio shall be limited to (1) a maximum sixty (60) days when calculated utilizing the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made and may utilize the interest rale reset date for variable rate notes (VRN) or floating rate securities and (2) ninety (90) days or fewer as calculated taking into account the period remaining until the date on which in accordance with the terms of each security the principal amount must unconditionally be paid or in the case of a security called for redemption the date on which the redemption payment must be made with a maximum final stated maturity for any obligation of or securities that are guaranteed or insured by the United Stales its agencies or instrumentalities limited to 397 days for fixed rate securities and 24 months for variable rate notes All investments shall be purchased on a delivery versus payment (OVP) basis Specific portfolio composition and maturrty limitation guidelines shall be guided by the following general parameters
Portfolio Composition
The composition of the Fund shall be limited as follows Limitations shall be applied by comparing the aggregate market value of the Funds investments as of the close of business on the day preceding purchase Investments need not be sold to maintain continuing compliance with composition limits unless required by TEXSTARs general investment objectives
US Government Securities Agencies and Instrumentalities The Fund portfolio may be comprised of one hundred percent (100) obligations of unconditionally guaranteed or insured by or backed by the full faith and credit of the United States or its agencies or instrumentalities
Repurchase Agreements One hundred percent (100) of the Fund may be invested in direct repurchase agreements The continuing need for liquidity and the short-term profile of the portfolio dictates a high use of repurchase agreements
Term Repurchase Agreements Not more than percent (25) in aggregate of the total market value of the Fund may be invested in term repurchase agreements Term repurchase agreements will be used primarily to enhance portfolio return
Reverse Repurchase Agreements TEXSTAR is permitted to enter into reverse repurchase agreements for investments in the Fund totaling not more than one third (13) of the value of the Funds total assets Reverse repurchase agreements will be used primarily to enhance Fund return
Variable Rate Noles A maximum of 60 percent (60) of the Fund may be invested in eligible variable rate notes
556582412
5
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Maturity limitations
Government Securities Agencies ancllnstrumentalflies The maximum final stated maturity for any securities that are obligations of or guaranteed or insured by the United States government its agencies or instrumentalities shall be limited to 397 days for fixed rate securities and 24 months for variable rate notes
Repurchase Agreements The maturity of direct repurchase agreements shall not exceed ninety-five (95) days unless the repurchase agreements have a put option that allows the fund to liquidate the position at par (principal plus accrued interest) with no more than 7 days notice to the counterparty
Reverse Repurchase Agreements Money received under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments The authorized investments acquired must mature not later than the expiration date stated in the reverse repurchase agreement The term of a reverse repurchase agreement may not exceed ninety (90) days
PURCHASERS
All trades purchases and sales transacted for TEXSTAR shall be done on a best execution basis The broker-dealers used for TEXSTAR shan be those approved by the Board
COLLATERALIZATION AND SAFEKEEPING
All repurchase agreements shall be fully collateralized as required by law The market value of collateral shall be equal to alleast one hundred and tlNo percent (102) of the lotal amount payable to TEXSTAR under the repurchase agreement including accrued interest and shall be checked daily
All book entry securities whether purchased outright or under repurchase agreements shall be held in a custodial account at the Federal Reserve Bank The Custodian shall keep accurate records reflecting TEXSTARs ownership of the securities
All securities not held in book entry form shall be held by the Custodian or its agent Third party institutions must issue original safekeeping rece ipts to the Custodian
AUTHORIZED PERSONNEL
All investment manager personnel authorized to buy and sell investment instruments send and receive securities make fund transfers and other types of related investment transactions shall be directly supervised by senior management personnel of the investment manager
DOCUMENTATION
Reasonable documentation and a thorough audit trail shall be maintained for all investment transactions
55658241 2 6
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
DIVERSIFICATION AND SUITABILITY
The TEXSTAR Cash Reserve Fund portfolio shall be designed with the protection of principal and maintenance of sufficient liquidity to all participants as the highest priority After consideration of safety and liquidity the portfolio shall be designed to achieve a competitive rale of return for participants that meets or exceeds the yield on money market mutual funds with similar investment authority The risk-return relationship shall be maintained and controlled through this Investment Policy and the TEXSTAR Operating Procedures Adequate collateralization and delivery versus payment procedures Shall be utilized at all times in an attempt to minimize risk
Diversification by market sector and security types as well as maturity may be used in an attempt to protect the TEXSTAR Cash Reserve Fund against market and credit risk as well as aiding in liquidity requirements The portfolio shalt be structured to benefit from anticipated market conditions and to achieve a reasonable return
Cash needs and cash expectations shall take priority in designing and structuring each Fund portfolio Income and expenditure history shall be developed and continuously updated to determine the liquidity needs of the TEXSTAR Cash Reserve Fund Reports of these cash flow needs shall be used to develop the maturity structure of each Fund to assure liquidity to all participants In order to meet the anticipated liquidity needs the portfolio shall be designed to ensure sufficient distribution of investments in liquid shortshyterm instruments
DISTRIBUTION OF GAINS AND LOSSES
All gains or losses from the sale of and all other income received from securities held in the TexSTAR Cash Reserve Fund shall be distributed among its participants in proportion to their day-weighted units in the Fund and generally are amortized over a period of up to thirty (30) days from the date on which the gain loss or income is realized or received
CONSTANT DOLLAR OBJECTIVE
The objective of the TexSTAR Cash Reserve Fund is to maintain a stable value of $1 00 per unit All securities in the portfolio shall be marked to market daily If upon a daily calculation the investment manager finds th at the deviation between the amortized cost and market-determined va lues per unit of the Portfolios assets exceeds $00030 it shall promptly notify the Board In the event that the deviation from amortized cost per unit exceeds $00040 the Board shall direct the investment manager to take such action if any as it determines is necessary to eliminate or reduce to the extent reasonably practicable any dilution or unfair results to existing participants Notwithstanding the foregoing absent contrary instructions from the Board the investment manager shall cause the subject investments to be sold promptly to attempt to bring the deviation back within the desired value band However the $100 per unit value is not guaranteed or insured by TexSTAR or the co-administrators
MONITORING MARKET PRICE
Through one or both of the co-administrators TEXSTAR shall account for all Fund transactions and shall mark to market the Fund portfolio holdings of TEXSTAR on a daily basis through the use of an independent third party pricing service The market prices
55658241 2 7
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
shall be checked daily for current data and validity of information In addition a reasonability test shall be performed in order to determine if the prices received are within a set tolerance range In the event that any of the prices faU outside of the set tolerance range then these prices shall be investigated
VI ADMINISTRATIVE CONSIDERATIONS
PARTICIPATION AGREEMENTS
Each participant must have a fully executed application on file with TEXSTAR before investing in TEXSTAR
DEPOSIT AND WITHDRAWAL DEADLINES
See separate TEXSTAR Operating Procedures for detailed deposit and withdrawal deadlines
REPORTING AND DISCLOSURE
Each participant must obtain and should review the TEXSTAR Cash Reserve Fund Information Statement before investing TEXSTAR will furnish investment confirmations and a monthly report disclosing certain information to participants in accordance with the Texas Public Funds Investment Act Additional information is available on the TEXSTAR web site wwwtexstar org or by calling TEXSTAR Participant Services at 1-800-TEXSTAR (1-800-839-7827)
TEXSTAR is audited annually by an independent auditor
AUTHORIZED DEALERS
The investment manager shall maintain a list of primary dealers and brokers authorized to provide investment services to TExSTAR All dealers and brokers who desire to become qualified to enler into investment transactions must supply to the investment manager a written acknowledgment that the entity has read the TEXSTAR Cash Reserve Fund Investment Policy and has reasonable procedures and controls in an effort to preclude investment transactions conducted between the entity and TEXSTAR that are not authorized by the Investment Policy other than due to diversification requirements or subjective standards
SS658241 2 8
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
ETHICS AND CONFLICTS OF INTEREST
The investment manager may order the purchase of investments from or in mutual funds managed by either co-administrator or affiliates only on substantially the same terms and conditions as those permitted by the US Securities and Exchange Commission (SEC) for related party transactions with mutual funds registered with the SEC In addition employees of the co-administrators shall refrain from personal business activity that conflicts with the proper execution and management of the TEXSTAR program or thai could impair their ability to make impartial decis ions Each co-administrator shall implement policies and procedures to comply with these restrictions and shalt promptly report any material non-compliance to the Board
Subject to the foregoing agents advisors and contractors providing services in connection with the custody management and investment of public funds under a contract with the Board must at all times avoid any actual or apparent conflict of interest with respect to the custody management and investment of public funds For purposes of this investment policy a conflict of interest refers to any situations in which the duties of an agent advisor or contractor under its contract with the Board are or may become inconsistent with the interesls or other duties of the agent advisor or contractor
December 2010
55658241 2 9
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
This Page Intentionally Left Blank
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Item 2C
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY
AGENDA RECOMMENDATION FORM
BOARD OF DIRECTORS X AGENDA ITEM 2C
PLANNING COMMITTEE DATE SUBMITTED 82713 FINANCE COMMITTEE MEETING DATE 90413 TECHNICAL COMMITTEE 3 Agenda Item RESOLUTION 2013-29 ndash AUTHORIZING THE ADDITION OF JERRY DALE AND
PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS 2 Nature of Request (Brief Overview) Attachments X Yes No Consideration and authorization for the addition of Jerry Dale and Pilar Rodriguez as signatories
on all First National Bank accounts 3 Policy Implication Board Policy Local Government Code Texas Government Code 4 Budgeted Yes No X NA
Funding Source NA 5 Staff Recommendation Motion to approve Resolution 2013-29 ndash Authorizing the addition of
Jerry Dale and Pilar Rodriguez as signatories on all First National Bank accounts 6 Program Managerrsquos Recommendation Approved Disapproved X None 7 Board Attorneyrsquos Recommendation X Approved Disapproved None 8 Chief Financial Officerrsquos Recommendation X Approved Disapproved None 9 Executive Directorrsquos Recommendation X Approved Disapproved None
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Memorandum To Dennis Burleson Chairman
From Pilar Rodriguez PE Executive Director
Date August 27 2013
Re Authorization of the addition of Jerry Dale and Pilar Rodriguez as Signatories on all First National Bank Accounts
Background The Hidalgo County Regional Mobility Authority (HCRMA) has historically held excess idle cash in its four (4) non-interest bearing demand accounts at the First National Bankmdashrecently amounting to in excess of $4 Million Recently we reduced that by about $33 Million to purchase a Treasury Bill with a maturity of September 19 2013 to hold in the Trust Department as custodian in order to provide sufficient time to establish account with TexSTAR an intergovernmental investment pool approved by Public Funds Investment Act (PFIA) as well as the HCRMArsquos Investment Policy and Co-Managed by JP Morgan and First Southwest Company Goal In coordination with the proposed approval to participate in the TexSTAR Program staff is requesting authorization to add the Chief Financial Officer and Executive Director as authorized signatories on all First National Bank Accounts The approval will allow staff to transfer investments in TexSTAR to demand accounts with First National Bank and vice versa Approval will allow executive staff to address daily transactions that are necessary as part of the management of the Authorityrsquos finances As an internal check and balance two signatures will be required on all transactions conducted with First National Bank andor TexSTAR Options The addition of signatories may be disapproved Recommendation Based on review by this office approval of resolution authorizing the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts is recommended If you should have any questions or require additional information please advise
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY BOARD RESOLUTION NO 2013-29
RESOLUTION AUTHORIZING THE ADDITION OF JERRY DALE AND PILAR RODRIGUEZ AS SIGNATORIES ON ALL FIRST NATIONAL BANK ACCOUNTS
THIS RESOLUTION is adopted this 4th day of September 2013 by the Board of Director of the Hidalgo County Regional Mobility Authority
WHEREAS the Hidalgo County Regional Mobility Authority (the ldquoAuthorityrdquo) acting through its Board of Directors (the ldquoBoardrdquo) is a regional mobility authority created pursuant to Chapter 370 Texas Transportation Code as amended (the ldquoActrdquo) and
WHEREAS the Authority was created by Order of Hidalgo County (the ldquoCountyrdquo) dated
October 26 2004 Petition of the County dated April 21 2005 and a Minute Order of the Texas Transportation Commission (the ldquoCommissionrdquo) dated November 17 2005 pursuant to provisions under the Act the Authority and
WHEREAS the Authority has established certain bank accounts with First National
Bank in connection with a letter of credit agreement by and between First National Bank and the Authority and
WHEREAS it has become necessary to revise the authorized signatories for the bank
accounts and NOW THEREFORE BE IT RESOLVED BY THE BOARD OF DIRECTOR OF THE
HIDALGO COUNTY REGIONAL MOBILITY AUTHORITY THAT
Section 1 The recital clauses are incorporated in the text of this Resolution as if fully restated Section 2 The Board authorizes the addition of Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
Passed and Approved as to be effective immediately this 4th day of September 2013 at a regular meeting of the Board of Directors of the Hidalgo County Regional Mobility Authority at which a quorum was present and which was held in accordance with the provisions of Chapter 551 Texas Government Code
Dennis Burleson Chairman
Attest
Ricardo Perez SecretaryTreasurer
Notice amp Agenda
Item 2A - Resolution 2013-27 - Approval of proposed schedule for issuance of HCRMA 2013 Vehicle Registration Fee Revenue Bond
Item 2B - Resolution 2013-28 - Authorization to establish a local government fund investment pool account with TexSTAR
Item 2C - Resolution 2013-29 - Authorization to add Jerry Dale and Pilar Rodriguez as signatories on all First National Bank Accounts
