Page 43 - CityofColleyvilleFY23AdoptedBudget
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Collateral shall be "marked to market" monthly by the Finance Manager. The following percentages constitute
the minimum market value for collateral instruments that are pledged for the City's Certi cates of Deposit and
demand deposits.
Form of Collateral Pledged Collateral Ratio
. U.S. Treasury bills, notes, and bonds
a. maturing within 1 year 102%
b. maturing in 1-5 years 105%
c. maturing in more than 5 years 110%
. Actively traded U.S. Government Agency securities
a. maturing in less than 1 year 103%
b. maturing in 1-5 years 107%
c. maturing in more than 5 years 115%
. GNMA mortgage pass through securities 115%
. Entities in the State of Texas bonds
General Obligation Bonds
a. maturing in less than 1 year 102%
b. maturing in 1-5 years 105%
c. maturing in more than 5 years 107%
Revenue Bonds
a. maturing in less than 1 year 105%
b. maturing in 1-5 years 110%
c. maturing in more than 5 years 115%
Collateral shall be audited annually be the City's independent auditor and may be audited by the City at
anytime during normal business hours of the safekeeping bank.
Arbitrage
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 yield earned on the
investment of the funds and compare it to the yield 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 ve 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.
The investment strategy for bond funds which fall under the arbitrage provisions of the Tax Reform Act of 1986,
is that the City will attempt to earn maximum allowable bond yield with market conditions permitting.
Repor ting Requirements
City of Colleyville | Budget Book 2023 Page 43