Page 314 - City of Colleyville FY22 Adopted Budget

The Tax Reform Act of 1986 places limitations on the City's yield from
investing certain tax-exempt bond proceeds, debt service funds and reserve
funds. The rebate provisions require that the City compute earnings on
investments from certain issues of bonds on a periodic basis to determine if
rebate is required.

To determine the City's arbitrage position, the City is required to calculate the
actual interest income earned on the investment of the funds and compare it
to the income that would have been earned if the funds had been invested at
a rate equal to the yield on the applicable bonds sold by the City. The rebate
provisions state that periodically (not less than once every five years and not
later than sixty days after maturity of the bonds), the City is required to pay
the United States Treasury a rebate of any excess earnings. These restrictions
require extreme precision in the monitoring and record keeping of
investments, particularly in computing yields to ensure compliance. Failure
to comply can dictate that the bonds become taxable, retroactively from the
date of issuance.

Investment of bond fund proceeds which fall under the arbitrage provisions of
the Tax Reform Act of 1986, will be made with safety of principal and liquidity
in mind, but will attempt to earn a competitive rate of return utilizing
investments permitted by this Investment Policy.

Reporting Requirements

The Investment Officers shall issue a written report quarterly to the Audit
Committee and City Council concerning the City's investment transactions for
the preceding quarter and describing in detail the investment position of the
City as of the end of the quarter. The report shall list for each investment
held during the quarter: the purchase price, the par value, the maturity date,
the market value at the beginning of the quarter, the market value at the end
of the quarter, and fully accrued interest for the period. The report shall be
signed by all Investment Officers for the City and state its compliance with
PFIA and the adopted Investment Policy strategy.

Monthly market pricing information is to be obtained through the use of
appropriate external third party software, third party safekeeping service
providers, or an independent pricing source.

“Weighted average yield to maturity” shall be the standard on which
investment performance is calculated.

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