Board Agenda - June 06, 2006

3. Policy CDA(Local) Other Revenues: Investments - First reading

Presenter: Karla Oliver

Purpose: A - Request decision - closure required

Time: 5 minutes

Description:

Legislation was passed (HB 233) during the 79th Legislative regular session that allows governmental entities to identify in their investment policies the standard by which they measure investment performance. We have worked with our Investment Advisor, First Southwest Asset Management, Inc. (FSAM), as part of the annual review of our investment policy to recommended the addition of a new section to our local investment policy in order to clarify the District’s chosen benchmark to measure investment performance. In practice, the District has been using the weighted-average yield to maturity as the measure of performance for our investment portfolio, but this measurement has not been identified as the performance benchmark in our investment policy. Without the inclusion of this new section, the District could be potentially subject to being required to calculate the internal rate of return (IRR) on all investments if we received a future open records request for investment information. The IRR is useful in comparing investments in stocks to investment in bonds, but since the Public Funds Investment Act prevents governmental entities in Texas from purchasing stocks the IRR is neither useful nor necessary as a performance standard for the District. This policy has been reviewed and approved by legal counsel.

Recommendation:

Approve CDA policy on first reading.

Business Impact:

None.

Summary:

Appendix:

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