City Council Meeting Agendas & Information

CITY COUNCIL MEETING AGENDA Thursday, September 4, 2025 at 6:30 PM Bulverde City Hall Council Chamber 30360 Cougar Bend, Bulverde, Texas 78163 HELEN HAYS Mayor JASON KRAWIETZ FRANCESCA WATSON Council Member, Place 1 Council Member, Place 2 TED HAWKINS CLINT HAYS Council Member, Place 3 Council Member, Place 4 JOE ALEXANDRE CHRISTOPHER GOTH Mayor Pro Tem, Place 5 Council Member, Place 6 Time is provided for public comments on any posted agenda item at the time the item is considered. Each person should fill out the speaker’s register prior to the meeting. The presiding officer, during the agenda item, will call on those persons who have signed up to speak on each item, in the order they have registered. Presentations should be limited to no more than (3) three minutes. All remarks shall be addressed to the Council as a body, and not to any individual member thereof. Any person making personal, impertinent, or slanderous remarks while addressing the Council may be requested to leave the meeting. 1. CALL THE MEETING TO ORDER 2. REGULAR AGENDA ITEMS 2.A. Public Hearing on the Proposed 2025 Tax Rate. 2.B. Public Hearing on the Proposed 2025-2026 Budget. 2.C. Consider approval of a resolution of the City of Bulverde, Texas adopting an Investment Policy. 2.D. Discuss and consider direction to staff regarding the City’s financial reporting practices. 3. ADJOURNMENT ________________________ Sandra V. Ham City Secretary City Hall is wheelchair accessible and accessible parking spaces are available. Requests for accommodation must be made 48 hours prior to the meeting. Please contact the City Secretary at 830.438.3612 or FAX 830.438.4339 for information or assistance. A quorum of the City Council, Planning & Zoning Commission, Parks & Recreation Advisory Board, and/or Zoning Board of Adjustment may be present at this meeting in order to discuss agenda items related to board business. I, the undersigned authority, do hereby certify that the above Notice of Meeting of the City Council of the City of Bulverde was posted on the bulletin board in front of Bulverde City Hall, which is readily accessible to the public at all times, and on the City's website, www.bulverdetx.gov, by 6:00 pm on August 28, 2025. The City Council reserves the right to adjourn into Executive session at any time regarding any issue for which it is legally permissible. The City Council will announce it will go into Executive Session, if necessary, pursuant to Chapter 551 of the Texas Government Code, to receive advice from Legal Counsel, to discuss matters of land acquisition, litigation, Economic Development negotiations, or personnel matters as listed on this agenda. The City Council may also announce it will go into Executive Session, if necessary, to receive advice from Legal Counsel regarding any other items on this agenda.  2.A & 2.B CITY COUNCIL ITEM Public Hearings Budget and Tax Rate MEETING DATE: September 4, 2025 AGENDA ITEM: 2.A. Public Hearing on the Proposed 2025 Tax Rate. 2.B. Public Hearing on the Proposed 2025-2026 Budget. DEPARTMENT: Administration PRESENTED BY: Mike Castro, City Manager BACKGROUND: RECOMMENDATION: ATTACHMENTS: • FY2026 City Council Budget Presentation  FY 2026 City Council Budget Presentation September 4, 2025  FY 26 City Budget - Overview General Fund Revenues: $ 10,473,712 Franchise Fees 5% Other Planning & 6% Development 6% Municipal Court 7% Property Tax 41% Sales Tax 35%  FY 26 City Budget - Overview General Fund Expenditures: $ 9,997,140 Administration 5% Other 14% Capital Professional Expenditures Services 16% 10% Municipal Court 3% ROW Acquisition Non Departmental 4% Planning & 8% Development 5% Parks and Recreation 1% Public Works Public Safety 6% 28%  City Budget - Overview • 2025-2026 Proposed Budget – Revenue Increases: • Sales Tax: +$523,800 • Property Tax: +$500,000 – New Expenditures • 1 Maintenance Laborer • 1 P/T PD Admin • 1 Code Compliance Specialist • 2% COLA + 3% Merit Increase • Mower for PW • Basic PW storage yard (Fence/Gravel) • CIP Study  Tax Rate Current Tax Rate: – $0.229807 – $ 3,723,700.00 Annual Revenue – ~$1018 Avg Home/$85 per month • Proposed Tax Rate – $0.259798 (De Minimus Rate) – $ 4,223,700.00 Annual Revenue – ~$1151 Avg Home/$96 per month  Proposed Total Tax Rate • Comal ISD: $1.274600 $ 1.274600 Comal County: $0.264230 $0. 264230 City of Bulverde: $0.259798 $0.259798 ESD 1 (BSB EMS): $0.069826 $0.069826 ESD 4 (SB Fire): $0.066832 or • ESD 5 (Bulverde Fire): $0.100000 • Total Prop. Tax Rate: $1.935286 or $1.968454 • Percentage of City rate as compared to Total: ~13%  Key Dates • Jun 25 Council Budget Work Session • Jun 30 Council Budget Work Session • Jul 10 Council Budget Work Session • Jul 25 Receipt of AV from Comal County • August 1 City Manager’s FY26 Proposed Budget Filed with City Secretary; • August 19 Council Adoption of Maximum Proposed FY26 Tax Rate • Sept 4 FY 26 Budget and Tax Rate Public Hearing • Sept 9 Adoption of FY26 Budget & Tax Rate • Oct 1 Start of FY26  Questions ?  2.C CITY COUNCIL ITEM Resolution Investment Policy MEETING DATE: September 4, 2025 AGENDA ITEM: Discuss and consider a resolution of the City of Bulverde, Texas adopting an Investment Policy. DEPARTMENT: Administration PRESENTED BY: Sharon Nelson, Finance Director BACKGROUND: Under Government Code 2256.005(e) the Council shall adopt a written Investment Policy not less than annually. The last time Council adopted the City of Bulverde’s Investment Policy was at the November 12, 2024 City Council meeting. The policy was presented to City Council at the regular August 12, 2025 City Council meeting. Council requested further examination of the policy prior to approval. RECOMMENDATION: Staff recommends that Council approve the City of Bulverde Investment Policy Resolution, with accompanying Investment Policy within. ATTACHMENTS: • Resolution adopting the City of Bulverde’s Investment Policy • 2025 Investment Policy  RESOLUTION NO. ______ A RESOLUTION OF THE CITY OF BULVERDE, TEXAS ADOPTING AN INVESTMENT POLICY; APPOINTING AN INVESTMENT OFFICER; PROVIDING A SEVERABILITY CLAUSE; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Texas Public Funds Investment Act, Chapter 2256, Texas Government Code (the “Act”) requires the City to adopt a written investment policy regarding the investment of the City's funds and funds under its control and to appoint an investment officer to be responsible for the investment of the City's funds consistent with the investment policy of the City; WHEREAS, the City Council finds and determines that the City of Bulverde Investment Policy, attached hereto as Exhibit A (the "Investment Policy"), primarily emphasizes safety of principal and liquidity and addresses investment diversification, yield, and maturity and the quality and capability of investment management as required by the Act; WHEREAS, the City Council finds and determines that adoption of this Resolution promotes the health, safety, and welfare of the public and the City of Bulverde; and WHEREAS, the City Council finds and determines that the meeting at which this Ordinance was passed was open to the public, that public notice of the time, place and purpose of said meeting was given as required by the Texas Open Meetings Act, Chapter 551, Texas Government Code; and that the City of Bulverde complied with all other requirements. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BULVERDE, TEXAS THAT: 1. Findings of Fact. The foregoing recitals are incorporated into this Resolution by reference as findings of fact as if expressly set forth herein. 2. Enactment: A. The Investment Policy is adopted as the investment policy of the City pursuant to the Act, replacing any and all other investment policies adopted by the City pursuant to the Act prior to the effective date of this Resolution. B. Under the direction of the City Manager, the Finance Director is designated as investment officer of the City pursuant to the Act. 3. Severability. Should any section, subsection, sentence, provision, clause or phrase be held to be invalid for any reason, such holding shall not render invalid any other section, subsection, sentence, provision, clause, or phrase of this Resolution and same are deemed severable for this purpose. 4. Effective Date. This Resolution shall be effective as of the date of adoption.  RESOLVED THIS _____ DAY OF ____________________, 2025. APPROVED: ATTEST: _________________________ _________________________ Helen Hays Sandra V. Ham, Mayor City Secretary 2 City of Bulverde Investment Policy  I. INTRODUCTION The purpose of this document is to set forth specific investment policy and strategy guidelines for the City of Bulverde in order to achieve the goals of safety of principal, liquidity, yield, and public trust for all investment activity. The City Council of the City of Bulverde shall review its investment strategies and policy annually. This policy serves to satisfy the statutory requirement (specifically the Public Funds Investment Act, Texas Government Code, Chapter 2256 (the “Act”)) to define, adopt and review a formal investment strategy and policy. The policy provides conformance to all statutes, rules, and regulations governing the investment of public funds. II. INVESTMENT STRATEGY The City of Bulverde may maintain separate portfolios, or one commingled portfolio which utilizes four specific investment strategy considerations designed to address the unique characteristics of the fund groups represented in the portfolios. The investment objective for each portfolio will maintain the following priorities in order of importance: understanding of the suitability of the investment to the financial requirements of the City, preservation and safety of principle, liquidity, marketability of the investment, diversification, and lastly yield. Operating funds and commingled pools containing operating funds, objective will ensure that anticipated cash flows are matched with adequate investment liquidity. An additional objective is to create a diversified portfolio structure, which will experience minimal volatility during economic cycles. This may be accomplished by purchasing high quality, short- to medium-term securities, which will complement each other in a laddered or barbell maturity structure. The maximum dollar weighted average maturity of 2 years or less will be calculated using the stated final maturity date of each security. The maximum maturity of any individual security the City may invest shall be five (5) years. Debt service funds shall have as their objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. No extended investment may be made unless the prior debt service dates are fully funded. Debt service reserve fund’s primary objective is the ability to generate a revenue stream to the appropriate debt service fund from securities with a low degree of volatility. Securities should be high quality and, except as may be required by the bond ordinance specific to an individual issue, of short to intermediate-term maturities. Volatility shall be further controlled through the purchase of securities, within the desired maturity and quality range. Special projects or special purpose fund portfolios will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. These portfolios should include at least 10% in highly liquid securities to allow for flexibility and unanticipated project outlays. The state final maturity dates of securities held should not exceed the estimated project completion date. III. SCOPE This investment policy applies to all financial assets of the City of Bulverde. These funds are accounted for in the City’s Annual Financial Report and include the General Fund, Special Revenue Funds, Enterprise/Proprietary Funds and any new fund unless specifically exempted by the City Council. Investment Policy City of Bulverde  IV. OBJECTIVES The primary objective of the City’s investment activity is the preservation of capital in the overall portfolio. Each investment transaction shall be conducted in a manner to avoid capital losses, whether they are from securities defaults or erosion of market value. All investments shall be designed and managed in a manner responsive to the public trust and consistent with State and local law. The City shall maintain a comprehensive cash management program, which includes collection of accounts receivable, vendor payment in accordance with invoice terms, and prudent investment of available cash. Cash management is defined as the process of managing monies to ensure maximum cash availability and maximum yield on short-term investment of pooled idle cash. The City’s investment portfolio shall be structured such that the City is able to meet all obligations in a timely manner. This shall be achieved by matching investment maturities with forecast cash flow requirements and by investing in securities with active secondary markets. The City’s cash management portfolio shall be designed with the objective of regularly matching or exceeding the yield on comparable U.S. Treasury Bill. The investment program shall seek to augment returns above this threshold consistent with risk limitations identified herein and prudent investment policies. V. DELEGATION OF RESPONSIBILITY A. Investment Officer Under the direction of the City Manager, the Finance Director is designated as investment officer of the city and is responsible for investment decisions and activities. The investment officer shall attend at least ten (10) hours of training relating to the officer’s responsibility under the Act within twelve (12) months after assuming duties. Thereafter, eight (8) hours of training must be completed every two fiscal years. The training cycle is concurrent with the city’s fiscal year. The Investment Officer shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair the ability to make impartial investment decisions. City staff shall disclose to the City Manager any material financial interests in financial institutions that conduct business with the City, and they shall further disclose positions that could be related to the performance of the City’s portfolio. An investment officer of the City who has a personal business relationship with an organization seeking to sell an investment to the City shall file statement disclosing that personal business interest. An investment officer who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the City shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the City. Investment Policy City of Bulverde B. City Council The City Council holds ultimate fiduciary responsibility for the portfolio. It will receive and review quarterly reporting, approve brokers/dealers, and review and adopt the Investment Policy and Strategy at least annually. VI. PRUDENCE The standard of prudence to be applied by the investment officer shall be the rule stated in Texas Government Code § 2256.006, which states: Investments shall be made with judgment and care, under circumstances then prevailing, that a person of prudence, discretion and intelligence exercises in the management of the person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. Investment of funds shall be governed by the following investment objectives in order of priority: (1) preservation and safety of principal, (2) liquidity, and (3) yield. In determining whether an investment officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: 1. The investment of all funds, or funds under the City’s control, over which the officer had responsibility rather than consideration as to the prudence of a single investment. 2. Whether the investment decision was consistent with the written investment policy of the City. The investment officer, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a securities specific credit risk or market price changes, provided that these deviations are reported immediately, and that appropriate action is taken to control adverse developments. VII. REPORTING The Finance Director shall submit a written and signed quarterly investment report of investment transactions for the preceding reporting period to the City Manager and City Council. The report will include a description in detail of the investment position of the city. To include: 1. A summary of investments, and their beginning market value, additions and changes to the market value during the period, ending market value, 2. fully accrued interest in the reporting period, 3. a description of each investment, 4. the market value of the portfolio must be determined at least monthly. Market prices will be obtained from an independent source, Investment Policy City of Bulverde  5. state the book value and market value of each separately invested asset at the end of the reporting period by the type of asset and fund type invested, 6. state the maturity date of each separately invested asset that has a maturity date, 7. state the compliance of the investment portfolio to the investment policy and strategy and the Act. If the City invests in other than mutual fund money markets, investment pools or bank time and demand accounts in any bank the reports prepared by the investment officers under this section shall be formally reviewed at least annually by an independent auditor, and the result of the review shall be reported to the governing body by that auditor. VIII. INVESTMENT PORTFOLIO A. Active Portfolio Management The City shall pursue a conservative pro-active versus passive portfolio management philosophy. That is, securities may be sold before they mature if market conditions present an opportunity for the City to benefit from the trade. The investment officer will routinely monitor the contents of the portfolio, the available markets, and the relative value of competing instruments, and will adjust the portfolio accordingly. The city is not required to liquidate investments that were authorized investments at the time of the purchase. B. Investments Assets of the City of Bulverde may be invested only in the following instruments as further defined in the Act. At least 3 competitive offers or bids must be obtained for all individual security purchases and sales. (Transactions with money market mutual funds, local government investment pools and when-issued securities shall also be evaluated with comparable investments). New issues will not be required to be competitively transacted as all brokers/dealers would show the same price and yield. 1. Authorized a. Obligations of the United States Government, its agencies and instrumentalities with a maximum stated maturity of three years, excluding mortgage-backed securities. b. General debt obligations of any US state or political subdivision rated AA or better with a stated maturity not to exceed five (5) years. c. Other obligations, the principal of and interest on which are unconditionally guaranteed by the State of Texas or United States of America or their respective agencies or insured by or backed by the full faith and credit with a maximum maturity of five (5) years. d. FDIC insured or collateralized depository certificates of deposit from banks that have their main office or a branch in Texas collateralized in accordance with this policy and with a maximum maturity of two (2) years. e. FDIC insured brokered certificate of deposit securities issued by any US state delivered versus payment to the City’s safekeeping agent not to exceed two (2) years to maturity. Before purchase, the investment officer must verify the FDIC status of the bank on www.fdic.gov to assure the bank is FDIC insured. Investment Policy City of Bulverde  f. AAA-rated, local government investment pools in Texas which strive to maintain a $1 net asset value (NAV) as defined by the Act and authorized by resolution of the City Council. g. Commercial paper rated A1/P1 or equivalent by two rating agencies with a maximum maturity of ninety (90) days. h. FDIC insured or collateralized interest bearing and money market accounts in any bank in Texas. i. AAA-rated, SEC registered money market funds striving to maintain a $1 NAV. 2. Not Authorized The City’s authorized investments options are more restrictive than those allowed by state law. State law specifically prohibits investment in the following investment securities: a. An obligation whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal. b. Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest. c. Collateralized mortgage obligations that have a state final maturity date of greater than 10 years. d. Collateralized mortgage obligations, the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. C. Holding Period The City of Bulverde intends to match the maturities with liability and liquidity needs of the City. In no case will the average dollar-weighted maturity of investments of the City’s operating funds exceed one (1) year. The maximum final stated maturity of any investment shall not exceed five (5) years. D. Risk and Diversification The City recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary illiquidity. Risk is controlled through portfolio diversification, which shall be achieved by the following general guidelines: Risk of issuer default is controlled by limiting investments to those high credit quality instruments allowed by the Act, further restricted by policy. Market risk can be limited by avoiding over-concentration assets in a specific maturity sector and limitation of average maturity of operating funds investment to two years. IX. SELECTION OF BANKS AND DEALERS A. Depository At least every five (5) years a Depository shall be selected through the City’s banking services procurement process, which shall include a formal request for proposal (RFP). In selecting a depository, the services, costs, earning potential and credit worthiness of institutions shall be Investment Policy City of Bulverde considered. The Finance Director shall conduct a comprehensive review of prospective depositories’ credit characteristics and financial history. B. Security Broker/Dealers All financial institutions and brokers/dealers who desire to become qualified bidders for investment transactions must supply the following as appropriate: • audited financial statements • proof of Financial Industry Regulatory Authority (FINRA) certification • proof of Texas registration • policy certification of review of the City’s investment policy signed by an authorized representative of the organization to include acknowledgment that the firm has implemented reasonable procedures and controls in an effort not to sell investments to the City unauthorized by policy. C. List of Qualified Brokers The City Council will annually adopt, by resolution, a list of authorized brokers to engage in investment transactions with the City. Each broker/dealer will provide the required policy certification before any transaction can be executed. X. COLLATERAL, SAFEKEEPING AND CUSTODY A. Time and Demand Deposit Pledged Collateral All bank time and demand deposits shall be secured by pledged collateral. To anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market value of principal and accrued interest on the deposits less an amount insured by the FDIC. Evidence of the pledged collateral shall be provided by the Custodian. Repurchase agreements shall be documented by a specific agreement noting the collateral pledge in each agreement. Monthly reports of collateral shall be provided directly from the custodian. Collateral pledged to secure deposits of the City shall be held by an independent financial institution outside the holding company of the depository in accordance with a written safekeeping agreement under the terms of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The safekeeping agreement shall clearly define the procedural steps for gaining access to the collateral should the City determine that the City’s funds are in jeopardy. The safekeeping institution shall be the Federal Reserve Bank or an institution not affiliated with the firm pledging the collateral. B. Repurchase Agreements Owned Collateral Collateral under a repurchase agreement is owned by the City. It will be held by an independent third-party safekeeping agent approved by the City under an executed Bond Market Association Master Repurchase Agreement. Collaterals with a market value totaling 102% of the principal and accrued interest is required and the counterparty is responsible for the monitoring and the maintaining of collateral and margins at all times. C. Authorized Collateral Defined Investment Policy City of Bulverde The City of Bulverde shall accept only the following securities as collateral: 1. FDIC insurance coverage. 2. Obligations of the US Government, its agencies and instrumentalities including mortgage- backed securities and CMO which pass the bank test. 3. Obligations, the principal and interest on which, are unconditionally guaranteed or insured by the State of Texas. 4. Securities from any US state and its subdivisions rated as A or better by two national recognized rating agencies. D. Subject to an Audit All collateral shall be subject to inspection and audit by the Finance Director or the City’s independent auditors. XI. INTERNAL CONTROLS The Finance Director is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the entity are protected from loss, theft or misuse. The internal control structure should be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Finance Director shall establish a process for an annual independent review by an external auditor to ensure compliance with policies and procedures. The internal controls should address the following points: • Control of collusion. • Separation of transaction authority from accounting and record keeping. • Custodial safekeeping. • Clear delegation of authority to subordinate staff members. • Written confirmation for telephone (voice) transactions for investments and wire transfers. Annually, the Investment Officer shall perform an internal compliance audit to assure compliance with requirements of this Policy and the Act. Annually, the City’s external auditor shall review the quarterly reports. A. Cash Flow Forecasting Cash flow forecasting is designed to protect and sustain cash flow requirements of the City. The Investment Officer will analyze and maintain a cash flow plan to monitor and forecast cash positions for Investment purposes. B. Delivery vs. Payment Security Settlement All transactions, except investment pool funds and mutual funds, shall be settled on a delivery versus payment basis. That is, payments shall not be made until the correct security, or other investment is received by the safekeeping agent. The security or other investment shall be held on behalf of the City. The Trustee’s records shall ensure the notation of the City’s ownership of or Investment Policy City of Bulverde explicit claim on the securities or other investment. The original copy of all safekeeping receipts shall be delivered to the City by the safekeeping agent. C. Loss of Credit Rating The investment officer shall monitor, on no less than a monthly basis, the credit rating on all authorized investments in the portfolio requiring ratings based upon independent information from a nationally recognized rating agency. If any security falls below the minimum rating required by Policy, the Investment Officer shall notify the City Manager of the loss of rating, conditions affecting the rating and possible loss of principal with liquidation options available. D. Monitoring FDIC Coverage The Investment Officer shall monitor, on no less than a monthly basis, the status and ownership of all banks issuing brokered CDs owned by the City based upon information from the FDIC. If any bank has been acquired or merged with another bank in which brokered CDs are owned, the investment officer shall immediately liquidate any brokered CD which places the City above the FDIC insurance level. XII. INVESTMENT POLICY ADOPTION The City of Bulverde investment policy shall be reviewed and adopted by Resolution of the City Council on at least an annual basis. Any changes made to the policy shall be reflected in the adopting Resolution. XIII. GLOSSARY OF TREASURY TERMS Agencies: Federal agency securities. Asked: The price at which securities are offered to be sold to the City. Bid: The price at which the City would sell its securities. Broker: A broker brings buyers and sellers together for a commission paid by the initiator of the transaction or by both sides; he does not position. Certificate of Deposit (CD): A time deposit with specific maturity evidenced by a certificate. Large- denomination CDs are typically negotiable. Collateral: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies and used to define the securities bought and sold under a repurchase agreement signifying ownership by the City. Comprehensive Annual Financial Report (CAFR): Includes five combined statements and basic financial statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance- Investment Policy City of Bulverde related legal and contractual provisions, extensive introductory material, and detailed statistical section. Coupon: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to bond evidencing interest due on a payment date. Dealer: A dealer, as opposed to a broker, carries an inventory of securities and may act as a principal in all transactions, buying and selling for his own account. Debenture: A bond secured only by the general credit of the issuer. Delivery versus Payment (DVP): Delivery versus payment means delivery of securities with a simultaneous exchange of money for the securities. It guarantees that the City always has control of its security or its fund. Discount: The difference between the cost price of security and its value at maturity when quoted at lower than face value. A security selling below the original offering price shortly after sale also is considered to be at a discount. Discount Securities: Non-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, for example: U.S. Treasury bills. Diversification: Dividing investment funds among a variety of securities offering independent returns. Federal Credit Agencies: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, for example: S&L’s, small business firms, students, farmers, farm cooperatives, and exporters. Federal Deposit Insurance Corporation (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per depositor. Federal Funds Rate (the “Fed Rate”): The rate of interest at which Federal funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. Federal Home Loan Banks (FHLB): The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks in relation to member commercial banks. Federal National Mortgage Association (FNMA or Fannie Mae): FNMA, like GNMA, was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development, H.U.D. It is the largest single provider of residential mortgage funds in the United States. Fannie Mae is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and secondary loans in addition to fixed-rate mortgages. FNMA’s securities are highly liquid and widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. Federal Open Market Committee (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The president of the New York Investment Policy City of Bulverde Federal Reserve Bank is a permanent member while the other presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of government securities in the open market as a means of influencing the volume of bank credit and money. Federal Reserve System: The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., twelve (12) regional banks, and about 5,700 commercial banks that are members of the system. Liquidity: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, security is said to be liquid if the spread between bid and asked prices is narrow and reasonable quantities can be purchased at those quotes. Local Government Investment Pool (LGIP): A local cooperative of a political subdivisions allowing joint investment and reinvestment of assets. Market Value: The price at which a security is trading and could presumably be purchased or sold. Master Repurchase Agreement: A simultaneous buy-sell transaction used primarily for short term investment performed only under a Bond Market Association Master Repurchase Agreement. The master agreement defines the transaction, identifies the relationship between the parties, establishes practices regarding ownership and custody of the securities during the term of the investment, provides remedies in the case of default, and clarifies ownership. Maturity: The date on which the principal or stated value of an investment becomes due and payable. Money Market: The market in which short-term debt instruments (bills, commercial paper, bankers’ acceptances, etc.) are issued and traded. Open Market Operations: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve’s most important and most flexible monetary policy tool. Portfolio: Collection of securities held by an investor. Primary Dealer: A primary dealer is designated by the NY Fed with strong restrictions which submits daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and is subject to its formal oversight. The list of current primaries is found on www.nyfed.gov. Prudent Person Rule: An investment standard. Investments shall be made with judgment and care, under circumstances then prevailing, which people of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. Investment Policy City of Bulverde Rate of Return: The rate obtainable on a portfolio or security based on its purchase price or its current market price. A rate of return portfolio is based on and traded to parallel an index and indicates active trading of the portfolio. Repurchase Agreement (RP or REPO): A buy-sell transaction in which a holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the “seller” money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money increasing bank reserves. Safekeeping: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection. SEC Rule 15C3-1: See uniform net capital rule. Secondary Market: A market made for the purchase and sale of outstanding issues following the initial distribution. Securities & Exchange Commission (SEC): Agency created by Congress to protect investors in securities transactions by administering securities legislation. Treasury Bills (T Bills): A non-interest-bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. Treasury Bond: The longest U.S. Treasury securities being auctioned at the time – usually 30-year maturity. Treasury Notes: Intermediate-term, coupon-bearing U.S. Treasury securities having initial maturities from two to ten years. Uniform Net Capital Rule: Securities and Exchange Commission requirement that member firms as well as non-member broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. Yield: The rate of annual income returns on an investment, expressed as a percentage. (a) Income Yield is obtained by dividing the current dollar income by the current market price of the security. (b) Net Yield or Yield to Maturity is the current income yield minus any premium above par. Authority/Date Issued: Resolution No. _____, Dated ____________ Investment Policy City of Bulverde