The City's investments are governed by the Public Funds Investment Act (PFIA) under Chapter 2256 of the Local Government Code. The act requires the City to review and annually adopt an investment policy for the funds or group of funds under its control. To meet the PFIA requirements, the investment policy must: be written, primarily emphasize safety of principal and liquidity, address investment diversification, yield, and maturity and the quality and capability of investment management.  

The City Council last amended the City's Investment Policy in July of 2025, which established authorization for an additional investment officer beyond the Finance Director, and aligned the policy with PFIA requirements which no longer mandated that brokers or financial institutions provide written acknowledgment of receipt and implementation of the City’s investment policy.

The PFIA requires a municipality to update the policy annually. The City's investment advisor reviewed the City's 2025 Investment Policy and recommended one minor change to the policy. The policy is attached to this agenda item for reference.

The investment policy also requires the City to maintain a list of broker/dealers authorized to provide brokerage services. The security broker/dealers must be authorized to engage in investment transactions with the City. The City's investment advisor provides the City with a list of authorized broker/dealers that City Council is responsible for adopting annually. Attached to this agenda item is the updated list of authorized broker/dealers - there were no changes. Also included is the prior year broker/dealer list for reference.

The City's investment advisor reviewed the City's current investment policy and recommended changes to the current policy as it relates the maturity of commercial paper.

The proposed amendment increases the maximum stated maturity for commercial paper from 270 days to 365 days. This change conforms the City's investment policy to the Public Funds Investment Act, Texas Government Code Section 2256.013, which was amended by H.B. 2706 during the 2019 regular legislative session to extend the maximum stated maturity of commercial paper from 270 days to 365 days from the date of issuance. The City's policy had continued to reflect the pre-2019 statutory limit.

No change is proposed to the credit quality standard. Commercial paper must continue to be rated not less than A-1 or P-1, or an equivalent rating, consistent with Section 2256.013.

The amendment establishes a ceiling and does not require the City to invest in commercial paper or to purchase longer-dated paper. Individual purchases remain subject to the policy's investment objectives — safety of principal first, then liquidity, then yield — and to the portfolio's maximum dollar-weighted average maturity and diversification limits. As a practical matter, most commercial paper is issued with maturities of 270 days or less, so the amendment provides incremental flexibility rather than a material change in investment strategy.

The amendment sets a ceiling. It doesn't appropriate funds, obligate the City to purchase commercial paper, or change the current portfolio. The policy continues to focus on the City's investment objectives of safety, liquidity, and yield as required by the PFIA.  

Pros:

• Adoption ensures compliance with the Public Funds Investment Act
• Statutory alignment related to commercial paper maturity

Cons: none.

The City Council may suggest other changes or amendments to the policy that meet the Public Funds Investment Act.