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Home My WebLink About03/06/2018 06B 4th Quarter 2017 Treasury ReportITEM TITLE: SUBMITTED BY: BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDASTATEMENT 1 Item No. 6.B. For Meeting of: March 6, 2018 4th Quarter 2017 Treasury Report Tara Lewis, Financial Services Manager SUMMARY EXPLANATION: The Treasury Report for the fourth quarter of 2017 is attached and consists of the following: 1. Memo: Summary and Narrative 2. Reports • Cash and Investment Summary • Investment Portfolio- Inventory by Agency • Investment Portfolio - Detail of Activity • Bonded Debt Schedule • I nterfund Borrowings and Investments ITEM BUDGETED: NA STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL: STAFF RECOMMENDATION: Accept report. BOARD/COMMITTEE RECOMMENDATION: ATTACHMENTS: Description Upload Date Type O Treasury Report 04 2017 Narrative 2/22/2018 Cover Memo O Treasury Charts Q4 2017 2222018 Exhibit 2 Memorandum To: The Honorable Mayor and Members of City Council Cliff Moore, City Manager Danny Agsalog, Director of Finance and Budget From: Tara Lewis, Financial Services Manager Date: March 6, 2018 Re: 2017 — 4th Quarter Treasury Report: Summary and Narrative The City's Investment Portfolio The City's investment activities are governed by State regulations and the City of Yakima's Investment Policy, as revised September 6, 2011. The City's Investment Portfolio can be divided into two general categories: 1) A Liquidity Portfolio of overnight investments. This category generally consists of funds invested in the Local Government Investment Pool (LGIP or "Pool") managed by the State Treasurer, and currently, a savings account held by a local financial institution. 2) An Investment Portfolio of time deposits and various securities with maturities normally not to exceed five years except when conditions warrant, and then up to eight years. The effective yield on the City's entire investment Portfolio for quarter ending 12/31/2017 was up from 1.24% to 1.44% reflecting the recent upward trend in interest rates. Interest rates have been climbing slowly and erratically as the Federal Reserve continues to increase the federal funds rate. As investments made during times of lower rates mature, the City is acquiring new investments at slightly higher yields due to the rise in market rates. Activity in the portfolio was moderate this quarter, with one maturity and two purchases. It is the City's practice to hold investments to maturity if they are not called (refinanced) by the issuer. Interest rates have been extremely low over the past several years beginning when the Federal Reserve drastically lowered the federal funds rate over the course of 2008 from 4.25% to almost zero. An historic first for the Fed, the rate was held at nearly zero until December 16, 2015 when they raised it one quarter of one percent to a range of 0.25% to 0.50%. The Federal Reserve has raised the rate 25 basis points four more times since late 2015. In December of 2017 it was raised to a range of 1.25% to 1.50%, the highest it has been in since October of 2008. The Federal Open Market Committee (FOMC) met on January 31, 2018 and voted to keep the December rate. The Committee meets again on March 21, 2018. It is anticipated that we will see another rate hike, but with a new chairman at the helm there is much speculation in the marketplace. The LGIP (Local Government Investment Pool) earnings rate continued to rise in 2017 from 0.64% last January to 1.28% in December. It rose again to 1.43% by the end of January 2018. Rates in the LGIP historically tend to be lower than the City's other holdings due to the short term nature of the investments. However, rates have started to climb more quickly and the LGIP is almost keeping pace with the Investment Portfolio. The Liquidity Portfolio is 12% of the total portfolio as of 12/31/2017. Due to the lower rate of return, only a small balance is generally kept in the Pool for emergency cash needs or to hold special funds such as Plaza donations or unspent bond proceeds during construction. As rates are trending upward, the liquidity portfolio may be use to hold additional excess cash for longer time periods in anticipation of rising rates. Longer term rates are historically higher than short term rates due to increased risk. The City does not generally purchase investments with maturities of more than 5 years due to risk and liquidity concerns. 3 The City's Bonded Debt Schedule The City's debt is typically structured with debt principal payments in the second and fourth quarter. The bulk of principal payments occur in November and December. Over $2.1 million was paid out in principal payments during the fourth quarter of 2017. Interfund Borrowings and Investments Ordinance 2013-011 authorizes the Director of Finance and Budget to execute temporary interfund loans as recommended by the Municipal Research and Services Center (MRSC). Interfund borrowing is financially advantageous in some situations where cash is needed but a formal financing is cost -prohibitive due to a relatively short term need or small amount. Funds having excess cash balances in reserve (such as the Equipment Replacement and Reserve Fund (ER&R) or a Utility fund that has reserves for future plant improvements) can earn at least an equivalent rate of interest from another fund as with an investment made under the City's investment policy, yet the borrowing fund has a lower interest and debt cost than would be imposed in an external financing. In the last audit of the City's financial processes and records, the State Auditor's Office recommended that the Interfund Policy be modified to more directly obtain Council's approval of interfund loans by resolution. Resolutions to support this recommendation are forthcoming for existing Interfund Loans at 12/31/17. The Policy and a new Ordinance are in process and will be brought forward for Council's review with the next potential interfund borrowing situation. The biggest obstacle to Interfund loans is the impact on a fund's Reserve balance. External financing allows the borrowing fund to record revenue for the amount of the loan to offset the cost of whatever project is being financed. This practice keeps the borrowing fund's Reserves intact. With internal borrowing, Accounting Standards do not allow this recording of revenue and therefore the Reserves are depleted by the project cost even though the fund has sufficient working capital due to the borrowed cash. This rule does not properly reflect the financial solvency of the borrowing fund in financial reports. Unfortunately, this idiosyncrasy in the accounting rules prevents the City from taking better advantage of interfund cash capacity. Public Safety Communications, Fund 151 was budgeted to borrow $720,000 in 2015 as a result of their move to the new Communications Center. That loan was drawn upon in 2016 in the amount of $450,000 under the Interfund Loan policy. Currently the fund is making interest -only payments, but a principal payment is budgeted for 2018. Fire Capital, Fund 332 borrowed $640,000 in 2016 toward equipment and apparatus costs from the Equipment Rental Reserve Fund under the Interfund Loan policy. The major apparatus was delivered in August 2017 creating the need for an additional loan of $460,000. The first loan was refinanced on January 1, 2017 using the General Fund and the additional loan in August was made from General Fund as well. Interest is not required to be paid since Fire Capital is fully supported by the General Fund. The Millsite Project, Fund 323 borrowed $500,000 from the REET Fund in December to meet unfunded obligations. The City is awaiting a change to the RCW provisions for LIFT financing that will enable bonding for the major construction phase of the project. It is anticipated that this loan will be repaid from bond proceeds. Interest payments will be made until such time as financing is secured or the loan is otherwise repaid. 2 City of Yakima Cash and Investment Summary December 31, 2017 Description Qty Par Book Percent of Portfolio Average Yield Q3 '17 Average Yield Q4 '17 Cash Balances on Hand in Banks NA $ 13,305,485 NA NA NA Local Government Investment Pool (LGIP) 1 $ 7,194,731 $ 7,194,731 12% 1.10% 1.19% Federal Agency Coupon and Discount 19 52,710,000 51,172,893 87% 1.26% 1.47% Other Investments 2 458,083 458,083 1% 1.10% 1.11% Total Invested 22 $ 60,362,814 $ 58,825,707 100% 1.24% 1.44% Summary of Investment Activity Book Balance Purchases Interest Maturities, Calls Book Balance 10/1/2017 & Deposits Reinvested & Withdrawals 12/31/2017 Local Government Investment Pool (LGIP) Federal Agency Coupon and Discount Other Investments $ 7,173,172 $ - $ 21,558 $ 49,229,519 3,938,796 456,818 1,266 - $ 7,194,731 1,995,422 51,172,893 458,084 Totals $ 56,859,509 $ 3,938,796 $ 22,824 $ 1,995,422 $ 58,825,707 Page 1 of 5 Yakima.9887.1.TSO_Q4_2017.xlsx Page 2 of 5 City of Yakima Investment Portfolio - Inventory by Agency December 31, 2017 Expected Call Most Agency Inv# Face Value Price Coupon Step Yield Maturity Settle Next Call Type Likely Call Federal Farm Credit Bank FFCB FFCB FFCB FFCB 1487 2,500,000 2,489,153 0.840 1.050 1/22/18 12/18/15 1/22/18 NC 1/22/18 1489 3,000,000 2,996,247 1.250 1.290 8/19/19 6/3/16 3/19/18 Amer 8/19/19 1496 2,015,000 1,994,713 1.470 1.740 2/17/21 4/6/17 2/17/21 1C -NC 2/17/21 1498 3,000,000 2,993,640 1.950 2.000 3/14/22 4/6/17 3/14/18 Amer 3/14/22 FFCB Totals and Average Yield 10,515,000 10,473,752 1.522 Federal Home Loan Bank FHLB 1492 2,030,000 1,994,020 1.500 1.880 11/9/21 12/14/16 3/9/18 Amer 11/9/21 The Public Safety Communicatioi 2,030,000 1,994,020 1.880 Resolution Funding Corporation RFCSP 1493 3,203,000 2,999,859 1.716 1.716 10/15/20 12/14/16 10/15/20 NC 10/15/20 RFCSP 1495 2,137,000 1,995,637 1.821 1.821 1/15/21 01/15/21 1/15/21 NC 1/15/21 RFCSP 1497 5,248,000 4,999,507 1.581 1.581 7/15/20 07/15/20 7/15/20 NC 7/15/20 RFCSP 1499 1,000,000 945,156 1.730 1.730 1/15/21 01/15/21 7/15/20 NC 1/15/21 RFCSP Totals and Average Yield 11,588,000 10,940,160 1.675 Federal National Management Association FNMA 1469 3,000,000 2,991,678 1.000 1.051 12/20/18 5/20/13 12/20/18 Qrty 12/20/18 FNMA 1488 3,000,000 2,999,970 1.500 1.500 5/22/20 6/3/16 5/22/17 Qrty 5/22/20 FNMA 1490 2,000,000 1,995,048 1.500 1.552 6/30/21 6/30/16 3/30/18 Qrty 6/30/21 FNMA 1491 2,000,000 1,997,896 1.500 1.520 12/30/21 6/30/16 3/30/18 Qrty 12/30/21 FNMA 1494 2,010,000 1,995,172 1.350 1.560 7/28/20 12/14/16 4/28/18 Qrty 7/28/20 FNMA Totals and Average Yield 12,010,000 11,979,764 1.410 Financing Corporation FICO 1464 3,630,000 3,435,105 1.049 1.049 2/8/18 10/31/12 2/8/18 NC 2/8/18 FICO 1478 1,366,000 1,297,155 1.320 1.320 5/2/18 5/27/14 5/2/18 NC 5/2/18 FICO 1482 2,100,000 1,998,482 1.373 1.373 8/3/18 12/19/14 8/3/18 NC 8/3/18 FICO 1483 4,160,000 3,995,580 1.290 1.290 2/8/18 12/19/14 2/8/18 NC 2/8/18 FICO 1485 2,119,000 1,999,702 1.460 1.460 9/26/19 10/2/15 9/26/19 NC 9/26/19 FICO 1486 3,192,000 3,059,171 1.410 1.410 12/27/18 12/17/15 12/27/18 NC 12/27/18 FICO Totals and Average Yield 16,567,000 15,785,196 1.295 Other Investments LGIP YFED YF -CD LGIP 7,194,731 7,194,731 1.191 1.191 NA NA NA NC NA 1473 177,167 177,167 0.400 0.400 NA 7/1/13 NA NC NA 1447 280,917 280,917 1.520 1.550 8/28/18 2/28/15 8/28/18 NC 8/28/18 Other Totals and Average Yield 7,652,814 7,652,814 1.186 Yakima.9887.1. TS0_04_2017.xlsx 6 City of Yakima Investment Portfolio - Detail of Activity December 31, 2017 Agency Beginning Additions and Calls and Ending Date of Inv# Face Value Purchases Maturities Face Value Activity Federal Farm Credit Bureau FFCB 1487 2,500,000 2,500,000 FFCB 1489 3,000,000 3,000,000 FFCB 1496 2,015,000 - 2,015,000 FFCB 1499 - 3,000,000 3,000,000 10/6/17 FFCB Totals 7,515,000 3,000,000 10,515,000 Federal Home Loan Bank FHLB 1492 2,030,000 - 2,030,000 FHLB Totals 2,030,000 2,030,000 RFCSP 1493 3,203,000 3,203,000 RFCSP 1495 2,137,000 - 2,137,000 RFCSP 1497 5,248,000 - 5,248,000 RFCSP 1499 - 1,000,000 1,000,000 10/6/17 FHLMC Totals 10,588,000 1,000,000 11,588,000 Federal National Management Association FNMA 1469 3,000,000 3,000,000 FNMA 1488 3,000,000 3,000,000 FNMA 1490 2,000,000 2,000,000 FNMA 1491 2,000,000 2,000,000 FNMA 1494 2,010,000 2,010,000 FNMA Totals 12,010,000 12,010,000 Financing Corporation FICO 1457 2,146,000 (2,146,000) 10/6/17 FICO 1464 3,630,000 FICO 1478 1,366,000 FICO 1482 2,100,000 FICO 1483 4,160,000 FICO 1485 2,119,000 FICO 1486 3,192,000 3,630,000 1,366,000 2,100,000 4,160,000 2,119,000 3,192,000 FICO Totals 18,713,000 (2,146,000) 16,567,000 Other Investments LGIP (State Pool) LGIP 7,173,172 21,558 Yakima Federal Savings 1473 176,990 177 Yakima Federal CD 1447 279,828 1,089 7,194, 731 177,167 280,917 Other Investment Totals 7,629,990 22,824 7,652,814 Grand Totals $ 58,485,990 $ 4,022,824 $ (2,146,000) $ 60,362,814 Page 3 of 5 Yakima.9887.1.TSO_Q4_2017.xlsx City of Yakima Bonded Debt Schedule - by Project Group December 31, 2017 Amount of Issue Current Balance Payments General Obligation Bonds 9/7/2004 11/1/2019 5/8/2007 5/1/2026 8/28/2009 12/1/2018 8/28/2009 12/1/2032 6/17/2003 12/1/2023 8/28/2008 12/1/2021 5/8/2007 5/1/2022 8/28/2008 12/1/2019 5/8/2007 5/1/2022 5/8/2007 5/1/2017 6/20/2013 6/20/2028 6/9/2014 6/1/2024 6/17/2014 12/1/2034 12/22/2015 12/1/2035 PFD Convention Center II PFD Convention Center III PFD Capitol Theatre PFD Capitol Theatre Sundome Expansion Fire Apparatus Fire Station Infrastructure Projects Downtown Futures River Road Street Project Demonstration Street Resurfacing Project Comm Center Move Soccer Complex Refunded 1996 issue Partial refunding of 2002 issue Tax exempt portion Build America Bonds (Taxable) Deferred Interest -Maturity $2.5M Ladder Truck Remodel Facility Ped crossing, street, infrastructure Renovate downtown improvements River Road improvements Various City street improvements Streets improvements City portion of County GO Bonds City portion of SOZO Sports Complex $ 4,175,000 $ 730,000 $ 4,910,000 3,435,000 2,055,000 250,000 4,980,000 4,980,000 1,430,528 393,790 760,000 270,000 815,000 330,000 2,190,000 455,000 1,490,000 600,000 1,765,000 5,000,000 3,630,769 13,140,000 9,885,000 1,716,500 1,535,000 5,000,000 4,512,916 380,000 78,302 60,000 78,929 122,359 Subtotal General Obligation Bonds $ 49,427,028 $ 31,007,474 $ 719,591 Certificate of Participation - State of Washington 8/22/2013 8/22/2013 6/1/2011 3/19/2013 9/28/2017 6/1/2019 6/1/2019 12/1/2020 7/1/2023 6/1/2027 Police Vehicles Fire Air Packs Fire Apparatus Fire Apparatus Energy Project 74 Take-home vehicles 70 Air Packs Two trucks purchased One truck LED Street Lighting $ 4,173,190 $ 1,502,033 $ 459,602 165,422 576,847 194,141 310,414 203,316 2,189,736 2,189,736 59,801 Subtotal Certificates of Participation $ 7,709,790 $ 4,254,649 $ 59,801 Revenue Bonds 5/31/2012 6/5/2008 6/5/2008 9/4/2004 11/1/2023 Wastewater 11/1/2027 Wastewater 11/1/2018 Water 9/1/2034 Irrigation Refunded 2003 $10,155,000 issue Refunded 1998 issue $ 9,400,000 $ 6,115,000 $ 5,440,000 3,345,000 1,883,951 220,000 5,215,000 3,680,000 900,000 260,000 210,000 Subtotal Revenue Bonds $ 21,938,951 $ 13,360,000 $ 1,370,000 Page 4 of 5 Y akim a.988 7.1. TSO_Q4_2017. xlsx City of Yakima Interfund Borrowing December 31, 2017 Description Original Balance Beginning Balance Issued Retired Ending Balance Investment Held by: Local Improvement District Bonds/Notes Fund 151 - Public Safety Communications Fund 332 - Fire Capital Fund 323 - Millsite Project $ 1,432,509 $ 144,902 $ 450,000 450,000 $ 10,393 $ 134,509 Equipment Rental Reserve 450,000 Equipment Rental Reserve 640,000 640,000 460,000 1,100,000 General Fund 500,000 500,000 REET Fund 151 - Public Safety Communications - Interfund Loan The Public Safety Communications Fund borrowed from the Equipment Replacement and Reserve Fund to provide working capital while they recover from the excess cash outflow caused by the move to the new Communications Center last year. The fund has been currently paying interest only on the debt while their cash balance recovers. There is a principal payment budgeted for 2018. Fund 332 - Fire Capital The Fire Capital fund borrowed $640,000 cash at the end of 2016 from Equipment Rental to finance the down payment on two fire apparatus that were under construction. The Fire Department took delivery of the apparatus and final payment was made in August 2017. Although an external financing through the LOCAL program had been anticipated, it was determined at that time that the flexibility of an Interfund loan was preferred and it was thus executed according to City policy. This first loan was refinanced through the General Fund in January and a second loan of $460,000 was executed to make the final payment in August. No interest is being charged on this loan since Fire Capital is normally funded entirely by the General Fund. Fund 323 - Millsite (LIFT) The Millsite project borrowed $500,000 from REET until such time as official financing can be secured. At that time the loan from REET will be repaid. A Statement of Official Intent for the reimbursement has been executed to meet bond requirements. Page 5 of 5 Yakima.9887.1.TSO_Q4_2017.xlsx