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Home My WebLink About08/18/2015 05B 2nd Quarter 2015 Treasury Report'1111111 1, nun 11,1:1141r10 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. S.B. For Meeting of: August 18, 2015 ITEM TITLE: 2nd Quarter 2015 Treasury Report SUBMITTED BY: Cindy Epperson, Director of Finance & Budget Tara Lewis, Financial Services Manager SUMMARY EXPLANATION: The Treasury Report for the fourth quarter of 2014 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 Interfund Borrowings and Investments Resolution: Ordinance: Other (Specify): Contract: Contract Term: Start Date: End Date: Item Budgeted: NA Amount: Funding Source/Fiscal Impact: Strategic Priority: Public Trust and Accountability Insurance Required? No Mail to: Phone: APPROVED FOR SUBMITTAL: RECOMMENDATION: Accept report. City Manager ATTACHMENTS: Description Upload Date DI 2nd Qtr 2015 Treasury Summary and Narraive 8/10/2015 Ei 2nd Qtr 2015 Treasury If .ortt)rts 8/10/2015 Type C';over Memo Memorandum To: The Honorable Mayor and Members of City Council From: Cindy Epperson, Director of Finance and Budget Tara Lewis, Financial Services Manager Date: August 18, 2015 Re: 2015 — 2nd 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 City's Investment Portfolio saw no activity in agency securities at all during the first half of 2015. This inactivity is due to two main factors: 1. The callable agency securities in the portfolio are paying interest at rates that are not high enough to induce an agency to refund (refinance) their bonds. The interest payments the City receives are generally pretty close to market, but the cost of calling and refunding debt outweighs the benefit to the respective agency for such securities. As a security gets closer to maturity, market rates drop below the coupon rate and the agency is likely to call the bond which will effectively cash the City out. The City can then reinvest the cash or apply it to current projects. As short term rates (under 3 years) are still pretty close to zero, agencies have no real incentive to call a bond until its remaining term brings it in to this 2 to 3 year range of maturity. The City's portfolio has a number of securities that will fall within this range of maturity in the next few months. There has been one investment called in July and a couple more expected in August. 2. Excess cash is being kept in reserve pending upcoming projects. In early stages of a project such as North First Street improvements, it is more efficient to use cash reserves and then be reimbursed from the proceeds of a bond issue or other debt once the project is in full swing or a completion date is in view. This helps avoid interest arbitrage if projects are held up and it can help keep interest costs lower by giving us flexibility over the timing in issuing bonds. Short term rates increased slightly. The LGIP jumped another hundredth of a point during the second quarter. The 3 month Treasury bill jumped seven hundredths of a percent from .01% to .08% (.0001 to .0008). To put this in perspective. Interest earned over that 3 month period on $1 million would be $200 as opposed to just $25. The City's Bonded Debt Schedule A number of bond principal payments are due in May and June although the bulk of principal payments occur in November and December. The first principal payment on the new debt from the Street project of 2014 came due in May. Bond principal payments totaled $2.3 million for the quarter. The newest debt on the schedule pertains to the relocation of the Communications Center which was financed by County -issued bonds in 2014. The City's portion, agreed to by Resolution 2014- 086 is listed as bonded debt on the schedule. $51,500 was paid toward principal in May. The Fiscal Agent for the State of Washington changed in February 2015 from the Bank of New York Mellon to US Bank. The transition occurred smoothly and the City has received excellent service from the new agent. Interfund Borrowings and Investments REET continues to pay monthly payments to the Equipment Rental reserve fund for the Kiwanis Park interfund loan. Refuse, Fund 471 has continued to be in a negative cash position off and on during much of 2014 and the first half of 2015. The cash situation continues to deteriorate as the fund does not earn sufficient revenue to cover its own expenses. The Interfund Loan policy states that a fund in a negative position for more than one calendar quarter will be subject to interest to be repaid to the fund making the loan. In previous quarters the fund has managed to repay all loans within each calendar quarter and has not triggered the interest requirement. Recently, the fund has not recovered and has not been able to pay back its current loan. It is likely that this loan will be outstanding more than one calendar quarter which by policy requires that the fund begin paying interest on the loan. Interest charges however, will only worsen the negative cash situation. An additional consideration for Refuse is that state regulations do not allow a fund to borrow cash from another fund without a projected ability to repay. The 2016 budget will need to demonstrate that the Refuse fund can recover its cash position and continue to operate on its own in the future. 2 City of Yakima Cash and Investment Summary June 30, 2015 Description Qty Par Book Percent of Portfolio Average Yield Q1 '15 Average Yield Q2 '15 Cash Balances on Hand and in Banks NA $ 7,497,691 NA NA NA Local Government Investment Pool (LGIP) 1 $ 1,542,964 1,542,964 3% 0.14% 0.15% Federal Agency Coupon and Discount 19 50,540,000 49,319,123 91% 1.33% 1.26% Other Investments 2 3,238,380 3,590,998 6% 1.13% 1.13% Total Invested 22 $ 55,321,344 $ 54,453,085 100% 1.29% 1.22% Summary of Investment Activity Book Balance 4/1/2015 Purchases & Deposits Interest Maturities, Calls Book Balance Reinvested & Withdrawals 6/30/2015 Local Government Investment Pool (LGIP) Federal Agency Coupon and Discount Other Investments $ 542,281 49,319,124 3,590,823 $ 4,500,000 $ 682 $ 3,500,000 $ 1,542,964 - - 49,319,124 175 - 3,590,998 Totals $ 53,452,228 $ 4,500,000 $ 857 $ 3,500,000 $ 54,453,085 Page 1 of 5 Yakima.5789.1.TSO_Q2_2015.xlsx City of Yakima Investment Portfolio - Inventory by Agency June 30, 2015 Agency Inv# Expected Call Most Face Value Price Coupon Step Yield Maturity Settle Next Call Type Likely Call Federal Farm Credit Bank FFCB 1462 2,000,000 2,000,000 1.290 FFCB 1481 1,000,000 998,844 0.690 1.290 9/25/18 9/25/12 8/25/15 Amer 9/25/15 0.690 5/1/17 5/30/14 9/1/15 Amer 5/1/17 FFCB Totals and Avera 3,000,000 2,998,844 1.090 Federal Home Loan Bank FHLB 1466 2,000,000 1,998,940 1.150 1.186 7/25/18 2/6/13 7/25/15 Qrty 1/25/16 FHLB 1467 2,000,000 1,994,456 0.850 0.850 10/30/17 2/6/13 7/30/15 Qrty 10/30/15 FHLB 1470 2,000,000 2,000,000 1.000 Step to 2.5% 1.112 6/20/18 6/20/13 6/30/15 Qrty 6/20/17 FHLB 1474 3,000,000 2,995,014 0.750 0.850 4/17/17 12/3/13 6/17/15 Amer 7/16/15 FHLB Totals and Avera 9,000,000 8,988,410 0.983 Federal Home Loan Mortgage Corporation FHLMC 1480 1,660,000 1,654,394 1.200 1.422 6/12/18 05/27/14 6/12/15 Qrty 12/12/15 FHLMC Totals and Ave 1,660,000 1,654,394 1.422 Federal National Management Association FNMA 1460 5,000,000 4,737,030 1.100 1.100 6/1/17 6/28/12 6/1/17 NC 6/1/17 FNMA 1468 2,000,000 2,000,000 1.200 1.200 4/18/18 4/18/13 4/18/15 Qrty 10/18/15 FNMA 1469 3,000,000 2,991,678 1.000 1.094 12/20/18 5/20/13 8/20/15 Qrty 11/20/16 FNMA 1475 2,000,000 1,985,500 1.300 1.400 7/30/18 12/13/13 7/30/15 Qrty 10/30/15 FNMA 1476 2,000,000 1,978,940 1.640 1.750 9/26/19 3/19/14 6/26/15 Qrty 9/26/15 FNMA 1477 2,400,000 2,394,468 1.200 1.500 2/22/18 3/19/14 8/22/15 Qrty 2/22/16 FNMA 1479 2,000,000 1,992,388 1.625 1.884 8/28/19 5/27/14 8/28/15 Qrty 8/28/15 FNMA 1484 2,000,000 1,997,730 1.625 1.870 8/28/19 12/19/14 8/28/15 Qrty 8/28/15 FNMA Totals and Aver. 20,400,000 20,077,734 1.405 Financing Corporation FICO 1454 722,000 678,045 1.200 1.200 5/2/17 2/2/12 5/2/17 NC 5/2/17 FICO 1455 2,356,000 2,199,953 1.348 1.348 4/6/17 2/29/12 4/6/17 NC 4/6/17 FICO 1457 2,146,000 1,995,422 1.340 1.340 10/6/17 4/25/12 10/6/17 NC 10/6/17 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 Totals and Avera 16,480,000 15,599,741 1.261 Other Investments LGIP LGIP 1,542,964 1,542,964 0.151 YFED 1473 175,396 175,396 0.400 CNTY 1442 500,000 565,490 5.000 CNTY 1471 2,295,000 2,582,127 5.000 YF -CD 1447 267,985 267,985 2.050 Other Totals and Avera 4,781,344 5,133,961 0.151 NA NA NA NC NA 0.400 NA 7/1/13 NA NC NA 1.500 7/1/15 8/19/11 7/1/15 NC 7/1/15 1.000 9/1/16 6/24/13 9/1/16 NC 9/1/16 2.100 8/31/18 2/28/15 8/31/18 NC 8/31/18 0.837 Coupon Steps Coupon Steps Investment # Rate up to: 2013 2016 2016 2017 2017 1470 June, Dec 20 1.000% 1.125 1.250% 1.500% 2.500% Page 2 of 5 Yakima.5789.1.TSO_Q2_2015.xlsx City of Yakima Investment Portfolio - Detail of Activity Quarter Ending June 30, 2015 Agency Beginning Additions and Calls and Ending Date of Inv# Face Value Purchases Maturities Face Value Activity Federal Farm Credit Bureau FFCB 1462 2,000,000 2,000,000 FFCB 1481 1,000,000 1,000,000 FFCB Totals 3,000,000 - - 3,000,000 Federal Home Loan Bank FHLB 1466 2,000,000 2,000,000 FHLB 1467 2,000,000 2,000,000 FHLB 1470 2,000,000 2,000,000 FHLB 1474 3,000,000 3,000,000 FHLB Totals 9,000,000 - - 9,000,000 Federal Home Loan Mortgage Corporation FHLMC 1480 1,660,000 1,660,000 FHLMC Totals 1,660,000 - - 1,660,000 Federal National Management Association FNMA 1460 5,000,000 5,000,000 FNMA 1468 2,000,000 2,000,000 FNMA 1469 3,000,000 3,000,000 FNMA 1475 2,000,000 2,000,000 FNMA 1476 2,000,000 2,000,000 FNMA 1477 2,400,000 2,400,000 FNMA 1479 2,000,000 2,000,000 FNMA 1484 2,000,000 2,000,000 FNMA Totals 20,400,000 - - 20,400,000 Financing Corporation FICO 1454 722,000 722,000 FICO 1455 2,356,000 2,356,000 FICO 1457 2,146,000 2,146,000 FICO 1464 3,630,000 3,630,000 FICO 1478 1,366,000 1,366,000 FICO 1482 2,100,000 2,100,000 FICO 1483 4,160,000 4,160,000 FICO Totals 16,480,000 - - 16,480,000 Other Investments LGIP (State Pool) LGIP 542,281 4,500,682 (3,500,000) 1,542,964 Yakima Federal Savings YFED 175,221 175 175,396 Grays County Bonds 1442 500,000 500,000 Cowlitz County Bonds 1471 2,295,000 2,295,000 Yakima Federal CD 1447 267,985 267,985 Other Investment Totals 3,780,487 4,500,857 (3,500,000) 4,781,344 Grand Totals $ 54,320,487 $ 4,500,857 $ (3,500,000) $ 55,321,344 Page 3 of 5 Y akima.5 789.1. TSO_Q2_2015. xlsx City of Yakima Bonded Debt Schedule - by Project Group Quarter Ending June 30, 2015 General Obligation Bonds 9/7/2004 11/1/2019 5/8/2007 5/1/2026 8/28/2009 12/1/2018 8/28/2009 12/1/2024 8/28/2009 12/1/2032 6/17/2003 12/1/2023 8/28/2008 12/1/2021 5/8/2007 5/1/2022 12/1/2005 12/1/2015 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 PFD Convention Center II PFD Convention Center III PFD Capitol Theatre PFD Capitol Theatre PFD Capitol Theatre Sundome Expansion Fire Apparatus Fire Station Parks and Recreation Infrastructure Projects Downtown Futures River Road Street Project Demonstration Street Resurfacing Project Comm Center Move Refunded 1996 issue Partial refunding of 2002 issue Tax exempt portion Build America Bonds (Taxable) Build America Bonds (Taxable) Deferred Interest -Maturity $2.5M Ladder Truck Remodel Facility Parks improvements Ped crossing, street, infrastructure Renovate downtown improvements River Road improvements Various City street improvements Streets improvements City portion of County GO Bonds $ 4,175,000 $ 4,910,000 2,055,000 1,755,000 3,225,000 1,430,528 760,000 815,000 755,000 2,190,000 1,490,000 1,765,000 5,000,000 13,140,000 1,716,500 1,830,000 $ 4,045,000 285,000 1,130,000 1,550,000 3,225,000 647,665 445,000 445,000 55,000 90,000 1,075,000 810,000 95,000 420,000 195,000 4,405,437 75,704 12,255,000 885,000 1,665,000 51,500 Subtotal General Obligation Bonds $ 45,182,028 $ 34,038,102 $ 1,642,204 Certificate of Participation - State of Washington 8/22/2013 8/22/2013 6/1/2011 3/19/2013 6/1/2019 6/1/2019 12/1/2020 7/1/2023 Police Vehicles Fire Air Packs Fire Apparatus Fire Apparatus 74 Take-home vehicles 70 Air Packs Two trucks purchased One truck $ 4,173,190 $ 2,877,771 $ 655,826 459,602 316,935 72,228 576,847 366,732 310,414 258,748 26,157 Subtotal Certificates of Participation $ 5,520,054 $ 3,820,186 $ 754,211 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 $ 9,400,000 $ 8,765,000 $ 5,440,000 4,095,000 Refunded 1998 issue 1,883,951 835,000 5,215,000 4,090,000 Subtotal Revenue Bonds $ 21,938,951 $ 17,785,000 $ Grand Total $ 72,641,033 $ 55,643,288 $ 2,396,415 Page 4 of 5 Yakima.5789.1.TSO_Q2_2015.xlsx City of Yakima Interfund Borrowings and Investments Quarter Ending June 30, 2015 Description Original Beginning Ending Balance Balance Issued Retired Balance Investment Held by: Local Improvement District Bonds/Notes $ 1,432,509 $ 337,296 REET 1 - Upper Kiwanis Park 600,000 371,730 $ 55,395 $ 281,902 Equipment Rental 25,747 345,982 Equipment Rental Funds in Negative Cash Position at Quarter End Ending Cash Balance Cash Extended by: Fund 471 - Refuse (384,798) General Fund, Wastewater The Refuse Fund has continued to be in a negative cash position off and on during the much of 2014 and the first half of 2015. The cash situation continues to deteriorate as the fund is not earning sufficient revenue to cover its own expenses. The Interfund Loan policy states that a fund in a negative position for more than one calendar quarter will be subject to interest to be repaid to the fund making the loan. To date the fund has managed to repay all loans within each calendar quarter and has not triggered the interest requirement. However, as of early August the fund has not recovered and has not been able to pay back its current loan. It is likely that this loan will be outstanding more than one calendar quarter which by policy requires that the fund begin paying interest on the loan. Page 5 of 5 Yakima.5789.1.TSO_Q2_2015.xlsx