Page 132 - CityofBurlesonFY26Budget

may provide advantage. At no time shall the debt service schedule be exceeded in an
attempt to bolster yield.

Yield - Attaining a competitive market yield for comparable investment-types and
portfolio restrictions is the desired objective. The yield of an equally weighted, rolling
three-month Treasury bill portfolio shall be the minimum yield objective.

(4) Debt Service Reserve Funds

Suitability - Any investment eligible in the Investment Policy is suitable for Debt Service
Reserve Funds. Bond resolution and loan documentation constraints and insurance
company restrictions may create specific considerations in addition to the Investment
Policy.

Safety of Principal - All investments shall be of high quality with no perceived default risk.
Market price fluctuations may occur. However, managing Debt Service Reserve Fund
maturities to not exceed the call provisions of the borrowing reduces the investment’s
market risk if the City’s debt is redeemed and the Reserve Fund liquidated. No stated final
investment maturity shall exceed the shorter of the final maturity of the borrowing or
three years. Annual mark-to-market requirements or specific maturity and average life
limitations within the borrowing’s documentation will influence the attractiveness of
market risk and reduce the opportunity for maturity extension.

Liquidity - Debt Service Reserve Funds have no anticipated expenditures. The Funds are
deposited to provide annual debt service payment protection to the City’s debt holders.
The funds are “returned” to the City at the final debt service payment. Market conditions
and arbitrage regulation compliance determine the advantage of investment
diversification and liquidity. Generally, if investment rates exceed the cost of borrowing,
the City is best served by locking in investment maturities and reducing liquidity. If the
borrowing cost cannot be exceeded, then concurrent market conditions will determine
the attractiveness of locking in maturities or investing shorter and anticipating future
increased yields.

Marketability - Securities with less active and efficient secondary markets are acceptable
for Debt Service Reserve Funds.

Diversification - Market conditions and the arbitrage regulations influence the
attractiveness of staggering the maturity of fixed rate investments for Debt Service
Reserve Funds. At no time shall the final debt service payment date of the bond issue be
exceeded in an attempt to bolster yield.

Yield - Achieving a positive spread to the applicable borrowing cost is the desired
objective. Debt Service Reserve Fund portfolio management shall at all times operate
within the limits of the Investment Policy’s risk constraints.

Diversification

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