HomeMy WebLinkAbout08/01/2017 06B 2nd Quarter 2017 Treasury ReportBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDASTATEMENT
Item No. 6.13.
For Meeting of: August 1, 2017
ITEM TITLE: 2nd Quarter 2017 Treasury Report
SUBMITTED BY: Tara Lewis, Interim Director of Finance & Budget
SUMMARY EXPLANATION:
The Treasury Report for the second 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:
STRATEGIC PRIORITY:
ful
Public Trust and Accountability
APPROVED FORC&h�
SUBMITTAL: -City Manager
STAFF RECOMMENDATION:
Accept report.
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description Upload Date Type
D Treasury Report Narrative 712112017 Covsr Memo
D Treasury Report Charts 7121/2017 Backup Material
Memorandum
To: The Honorable Mayor and Members of City Council
From: Tara Lewis, Interim Director of Finance and Budget
Jen Coleman, Financial Services Officer
Date: July 7, 2017
Re: 2017-2 nd 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 increased by several new acquisitions to replace investments that
had recently matured and to invest excess cash balances on hand. Interest rates have begun to
rise noticeably in recent months which will reduce the likelihood that current investments in the
City's portfolio will be called ahead of their stated maturities.
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 0.25%. The Federal Reserve has raised the rate
25 basis points three times since late 2015. In March of 2017 it was raised to 1.00% the highest it
has been since 2008.
During last quarter 3 investments were called or matured. The coupon rates were paying between
1.10% and 1.35%. Most of these funds were reinvested at around 1.47% to 1.82% which is slightly
higher than previous quarters. These new investments helped bring total portfolio to customary
levels.
The LGIP (Local Government Investment Pool) earnings rate improved significantly due to the
Fed's rate hikes. After closing 2014 at 0.10%, 2015 LGIP rates hovered around 0.13% - 0.14% all
year until December which closed 2015 at 0.25%. The yield averaged 0.50% in the third quarter of
2016 and dipped slightly in the fourth quarter to 0.48%. In 2017 the rates continue to rise from
0.48% to 0.87%. Rates in the LGIP tend to be lower than the City's other holdings due to the short
term nature of the investments. The City can access these funds overnight without penalty. This
feature means that the State Treasurer must keep a significant amount of the LGIP portfolio in
lower paying, short term investments.
Longer term rates are generally higher than short term rates due to increased risk. Long term rates
have risen more than short term, but the City does not generally purchase investments with
maturities of more than 5 years due to risk and liquidity concerns. Even so, long term rates are still
far below pre -recession levels. While this is good news for home buyers and agencies issuing new
debt, the volatility adds extra risk to the debt marketplace. An issuer can get lucky on a downturn or
find themselves with a higher rate than anticipated due to an upswing.
The City's Bonded Debt Schedule
The City's debt is typically structured with debt principal payments in the second and fourth quarter.
A number of debt payments were made during the quarter and the payments reducing the debts are
reflected on the schedule.
Interfund Borrowinas and Investments
Ordinance 2013-011 authorizes the Director of Finance and Budget to execute Interfund loans
when appropriate. 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 a
higher rate of interest from another fund than 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.
The biggest obstacle to Interfund loans is the impact on a fund 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. Internal
borrowing does 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.
Fire Capital, Fund 332 borrowed $640,000 toward equipment and apparatus costs during 2016. The
major apparatus are in the process of being built. The payments made represent just the chassis.
Although formal financing can be obtained in advance of taking delivery and making final payment
on the apparatus, there is added risk in doing so. Accordingly, an interfund loan reduces the risk
associated with advanced borrowing and keeps the costs lower in the long run. Due to general fund
cash issues Fire Capital may need to take a longer term loan from utilities or other financing source.
City of Yakima
Cash and Investment Summary
June 30, 2017
Description
Qty
Par
Book
Percent of
Portfolio
Average
Yield Q4'16
Average
Yield Q1'17
Cash Balances on Hand in Banks
& Deposits
NA
$ 12,973,855
NA
NA
NA
Local Government Investment Pool (LGIP)
1
$ 7,153,253
$ 7,153,253
13%
0.48%
0.65%
Federal Agency Coupon and Discount
19
50,856,000
49,229,518
87%
1.35%
1.26%
Other Investments
2
455,543
455,543
0%
1.10%
1.10%
Total Invested
22
$ 58,464,796
$ 56,838,315
100%
1.24%
1.18%
Page 1 of 5 Yakima.8994.1.TSO_Q2_2017.xlsx
Book Balance
Purchases
Interest
Maturities, Calls
Book Balance
Summary of Investment Activity
3/31/2017
& Deposits
Reinvested
& Withdrawals
6/30/2017
Local Government Investment Pool (LGIP)
$ 7,137,365
$ -
$ 15,888
$ -
$ 7,153,253
Federal Agency Coupon and Discount
47,854,688
8,989,858
-
7,615,028
49,229,519
Other Investments
454,298
-
1,245
455,543
Totals
$ 55,446,351
$ 8,989,858
$ 17,133
$ 7,615,028
$ 56,838,315
Page 1 of 5 Yakima.8994.1.TSO_Q2_2017.xlsx
City of Yakima
Investment Portfolio - Inventory by Agency
June 30, 2017
Expected Call Most
Agency Inv# Face Value Price Coupon Step Yield Maturity Settle Next Call Type Likely Call
Federal Farm Credit Bank
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
FFCB 1489
3,000,000
2,996,247
1.250
1.290
8/19/19
6/3/16
8/9/17
Amer
8/19/18
FFCB 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
FFCB Totals and Average Yield
7,515,000
7,480,112
1.330
Federal Home Loan Bank
FHLB 1492
2,030,000
1,994,020
1.500
1.880
11/9/21
12/14/16
2/9/17
Amer
11/9/20
The Public Safety Communication
2,030,000
1,994,020
1.880
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 Totals and Average Yield
10,588,000
9,995,004
0.791
Federal National Management Association
FNMA 1469
3,000,000
2,991,678
1.000
1.051
12/20/18
5/20/13
8/20/16
Qrty
12/20/18
FNMA 1488
3,000,000
2,999,970
1.500
1.500
5/22/20
6/3/16
11/22/16
Qrty
5/22/19
FNMA 1490
2,000,000
1,995,048
1.500
1.585
6/30/21
6/30/16
12/30/16
Qrty
6/30/19
FNMA 1491
2,000,000
1,997,896
1.500
1.531
12/30/21
6/30/16
12/30/16
Qrty
12/30/19
FNMA 1494
2,010,000
1,995,172
1.350
1.639
7/28/20
12/14/16
4/28/17
Qrty
7/28/19
FNMA Totals and Average Yield
12,010,000
11,979,764
1.430
Financing Corporation
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 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
18,713,000
17,780,617
1.300
Other Investments
LGIP LGIP
7,153,253
7,153,253
0.654
0.654
NA
NA
NA
NC
NA
YFED 1473
176,800
176,800
0.400
0.400
NA
7/1/13
NA
NC
NA
YF -CD 1447
278,743
278,743
1.520
1.550
8/28/18
2/28/15
8/28/18
NC
8/28/18
Other Totals and Average Yield
7,608,796
7,608,796
0.681
Grand Totals $
58,464,796
$ 56,838,315
1.179
Average Expected Yield
Page 2 of 5 Yakima. 8994.1.TSO_Q2_2017.xlsx
City of Yakima
Investment Portfolio - Detail of Activity
Quarter Ending June 30, 2017
FFCB Totals
Beginning Additions and Calls and
Ending Date of
Agency 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 Totals
5,500,000
2,015,000
- 7,515,000
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
FHLMC Totals
3,203,000
7,385,000
- 10,588,000
Federal National Management Association
FNMA
1460
5,000,000
(5,000,000) -
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
17,010,000
-
(5,000,000) 12,010,000
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
1485
2,119,000
2,119,000
FICO
1486
3,192,000
3,192,000
FICO Totals
21,791,000
-
(3,078,000) 18,713,000
Other Investments
LGIP (State Pool)
LGIP
7,137,365
15,888
- 7,153,253
Yakima Federal Savings
1473
176,624
176
176,800
Yakima Federal CD
1447
277,674
1,069
278,743
Other Investment Totals
7,591,663
17,133
- 7,608,796
Grand Totals
$ 57,125,663
$ 9,417,133
$ (8,078,000) $ 58,464,796
Page 3 of 5 Yakima.8994.1.TSO_Q2_2017.xlsx
City of Yakima
Bonded Debt Schedule - by Project Group
Quarter Ending June 30, 2017
I� Date Issued
Maturity
Description
Note
Amount of Issue
Current Balance
Payments JI
General Obligation Bonds
9/7/2004
11/1/2019
PFD Convention Center II
Refunded 1996 issue
$
4,175,000
$
1,110,000
$ -
5/8/2007
5/1/2026
PFD Convention Center III
Partial refunding of 2002 issue
4,910,000
3,750,000
315,000
8/28/2009
12/1/2018
PFD Capitol Theatre
Tax exempt portion
2,055,000
485,000
-
8/28/2009
12/1/2032
PFD Capitol Theatre
Build America Bonds (Taxable)
4,980,000
4,980,000
-
6/17/2003
12/1/2023
Sundome Expansion
Deferred Interest -Maturity $2.5M
1,430,528
472,092
-
8/28/2008
12/1/2021
Fire Apparatus
Ladder Truck
760,000
330,000
-
5/8/2007
5/1/2022
Fire Station
Remodel Facility
815,000
390,000
60,000
8/28/2008
12/1/2019
Infrastructure Projects
Ped crossing, street, infrastructure
2,190,000
670,000
-
5/8/2007
5/1/2022
Downtown Futures
Renovate downtown improvements
1,490,000
710,000
110,000
5/8/2007
5/1/2017
River Road
River Road improvements
1,765,000
215,000
215,000
6/20/2013
6/20/2028
Street Project Demonstration
Various City street improvements
5,000,000
3,866,572
78,273
The Public Safi
6/1/2024
Street Resurfacing Project
Streets improvements
13,140,000
11,090,000
1,205,000
6/17/2014
12/1/2034
Comm Center Move
City portion of County GO Bond.,
1,716,500
1,600,000
-
12/22/2015
12/1/2035
Soccer Complex
City portion of SOZO Sports Complex
5,000,000
4,755,618
120,343
Subtotal General Obligation Bonds
$
49,427,028
$
34,424,282
$ 2,103,617
Certificate of Participation - State of Washington
8/22/2013
6/1/2019
Police Vehicles
74 Take-home vehicles
$
4,173,190
$
2,201,970
$ 699,937
8/22/2013
6/1/2019
Fire Air Packs
70 Air Packs
459,602
242,508
77,086
6/1/2011
12/1/2020
Fire Apparatus
Two trucks purchased
576,847
253,942
-
3/19/2013
7/1/2023
Fire Apparatus
One truck
310,414
231,657
28,341
Subtotal Certificates of Participation
$
5,520,054
$
2,930,077
$ 805,363
Revenue Bonds
5/31/2012
11/1/2023
Wastewater
Refunded 2003 $10,155,000 issue
$
9,400,000
$
7,015,000
$ -
6/5/2008
11/1/2027
Wastewater
5,440,000
3,605,000
-
6/5/2008
11/1/2018
Water
Refunded 1998 issue
1,883,951
430,000
-
9/4/2004
9/1/2034
Irrigation
5,215,000
3,825,000
-
Subtotal Revenue Bonds
$
21,938,951
$
14,875,000
$ -
Grand Total
$
76,886,033
$
52,229,358
$ 2,908,980
Page 4 of 5 Yakima.8994.1.TSO_Q2_2017.xlsx
City of Yakima
Interfund Borrowing
Quarter Ending June 30, 2017
Original Beginning Ending
Description Balance Balance Issued Retired Balance Investment Held by:
Local Improvement District Bonds/Notes
$ 1,432,509 $
175,822 $
- $ 30,920 $ 144,902
Equipment Rental Reserve
Public Safety Communications
450,000
450,000
- - 450,000
Equipment Rental Reserve
Fire Capital
640,000
640,000
- - 640,000
Equipment Rental Reserve
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 original loan amount was budgeted at $720,000 but thus far the fund is surviving
on just $450,000. The fund is currently paying interest only on the debt while their cash balance recovers. Then they will begin repaying loan principal as well.
Fund 332 - Fire Capital
The Fire Capital fund borrowed cash at year end to finance the downpayment on two fire apparatus that have been under construction. Once the Fire Department
takes delivery on the apparatus and makes the final payment, financing will be secured to cover the entire balance. It is yet to be determined what the optimal
financing vehicle will be for the loan. Currently, the fund is paying interest only on its interfund loan balance.
Ending Cash
Funds in Negative Cash Position at Quarter End Balance Cash Extended by:
There were no funds in a negative cash position as of June 30, 2017
Page 5 of 5 Yakima.8994.1.TS0_Q2_2017.x1sx