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Home My WebLink About12/05/2017 06C 3rd Quarter 2017 Treasury ReportBUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDASTATEMENT 1 Item No. 6.C. For Meeting of: December 5, 2017 ITEM TITLE: 3rd Quarter2017 Treasury Report SUBMITTED BY: Tara Lewis, Financial Services Manager Jennifer Coleman, Financial Services Officer SUMMARY EXPLANATION: The Treasury Report for the third 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: City Manager ATTACHMENTS: Description Upload Date Type 0 Treasury Report Q3 2017 Narrative 11/27/2017 Cover Memo p Treasury its Q3 2017 11/27/2017 Exhibit 2 3 Memorandum To: The Honorable Mayor and Members of City Council From: Tara Lewis, Financial Services Manager Jennifer Coleman, Financial Services Officer Date: December 5, 2017 Re: 2017 — 3rd 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 9/30/2017 was up slightly from 1.21% to 1.24%. This was due to the slight increase in LGIP interest rates. The City's Investment Portfolio as a whole saw very little activity during the 3rd quarter of 2017. 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 more times since late 2015. In March of 2017 it was raised to 1.00%, the highest it has been since 2008. The Federal Open Market Committee (FOMC) met in September and elected to keep the rate at 1.00%. Analysts are predicting another small rate hike in 2017. The LGIP (Local Government Investment Pool) earnings rate continued to rise in 2017 from 0.64% to 1.12%. Rates in the LGIP historically tend to be lower than the City's other holdings due to the short term nature of the investments. The Liquidity Portfolio is 13% of the total portfolio as of 9/30/2017. Due to the minimal rate of return, only a small emergency balance is kept in the Pool. As rates begin to rise the City can now realize slightly higher return on its LGIP balances. 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. 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. As such only a couple of principal payments totaling $224,000 were made during the 3rd quarter. 4 Interfund Borrowings and Investments Ordinance 2013-011 authorizes the Director of Finance and Budget to execute temporary working capital loans between funds 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. At the end of 2016 Fire Capital Fund 332 borrowed $640,000 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 a need for additional loan of $460,000 from the Equipment Reserve Fund. Currently Fire Capital is making interest -only payments on the debt while their cash balance recovers. 2 City of Yakima Cash and Investment Summary September 30, 2017 Description Qty Par Book Percent of Portfolio Average Yield Q2 '17 Average Yield Q3 '17 Cash Balances on Hand in Banks NA $ 10,855,579 NA NA NA Local Government Investment Pool (LGIP) 1 $ 7,173,172 $ 7,173,172 13% 0.89% 1.10% Federal Agency Coupon and Discount 19 50,856,000 49,229,518 87% 1.26% 1.26% Other Investments 2 456,818 456,818 0% 1.10% 1.10% Total Invested 22 $ 58,485,990 $ 56,859,508 100% 1.21% 1.24% Summary of Investment Activity Book Balance Purchases Interest Maturities, Calls Book Balance 7/1/2017 & Deposits Reinvested & Withdrawals 9/30/2017 Local Government Investment Pool (LGIP) Federal Agency Coupon and Discount Other Investments $ 7,153,253 $ 49,229,518 455,543 - $ 19,919 $ - 1,275 - $ 7,173,172 - 49,229,518 456,818 Totals $ 56,838,314 $ - $ 21,194 $ - $ 56,859,508 Page 1 of 5 Yakima.9606.1.TSO_Q3_2017.xlsx City of Yakima Investment Portfolio - Inventory by Agency September 30, 2017 Agency Expected Call Most Inv# Face Value Price Coupon Step Yield Maturity Settle Next Call Type Likely Call Federal Farm Credit Bank FFCB FFCB FFCB 1487 1489 1496 2,500,000 3,000,000 2,015,000 2,489,153 2,996,247 1,994,713 0.840 1.050 1/22/18 12/18/15 1/22/18 NC 1/22/18 1.250 1.290 8/19/19 6/3/16 12/14/18 Amer 8/19/18 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 2/9/18 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 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 11/22/17 Qrty 5/22/19 FNMA 1490 2,000,000 1,995,048 1.500 1.585 6/30/21 6/30/16 12/30/17 Qrty 6/30/19 FNMA 1491 2,000,000 1,997,896 1.500 1.531 12/30/21 6/30/16 12/30/17 Qrty 12/30/19 FNMA 1494 2,010,000 1,995,172 1.350 1.639 7/28/20 12/14/16 1/28/18 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 YFED 1473 YF -CD 1447 7,173,172 7,173,172 1.103 1.103 NA NA NA NC NA 176,990 176,990 0.400 0.400 NA 7/1/13 NA NC NA 279,828 279,828 1.520 1.550 8/28/18 2/28/15 8/28/18 NC 8/28/18 Other Totals and Average Yield 7,629,990 7,629,990 1.103 Page 2 of 5 Yakima.9606.1. TSO_Q3_2017. xlsx 7 City of Yakima Investment Portfolio - Detail of Activity September 30, 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 Totals 7,515,000 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 10,588,000 10,588,000 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 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 2,146,000 3,630,000 1,366,000 2,100,000 4,160,000 2,119,000 3,192,000 FICO Totals 18,713,000 18,713,000 Other Investments LGIP (State Pool) LGIP 7,153,253 19,919 Yakima Federal Savings 1473 176,800 190 Yakima Federal CD 1447 278,743 1,085 7,173,172 176,990 279,828 Other Investment Totals 7,608,796 21,194 7,629,990 Grand Totals $ 58,464,796 $ 21,194 $ - $ 58,485,990 Page 3 of 5 Yakima.9606.1.TSO_Q3_2017.xlsx City of Yakima Bonded Debt Schedule - by Project Group September 30, 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 The Public Saf 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 $ 1,110,000 $ 4,910,000 3,435,000 2,055,000 485,000 4,980,000 4,980,000 1,430,528 472,092 760,000 330,000 815,000 330,000 2,190,000 670,000 1,490,000 600,000 1,765,000 5,000,000 3,709,698 13,140,000 9,885,000 1,716,500 1,600,000 5,000,000 4,635,275 78,601 Subtotal General Obligation Bonds $ 49,427,028 $ 32,242,065 $ 78,601 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 $ 459,602 165,422 576,847 253,942 310,414 203,316 2,400,000 2,400,000 Subtotal Certificates of Participation $ 7,920,054 $ 4,524,713 $ 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 $ 7,015,000 $ 5,440,000 3,605,000 1,883,951 430,000 5,215,000 3,680,000 145,000 Subtotal Revenue Bonds $ 21,938,951 $ 14,730,000 $ 145,000 Page 4 of 5 Y akim a.9606.1. TSO_Q3_2017. xlsx City of Yakima Interfund Borrowing September 30, 2017 Description Original Beginning Ending Balance Balance Issued Retired Balance Investment Held by: Local Improvement District Bonds/Notes $ 1,432,509 $ 144,902 $ - $ 9,800 $ 135,102 Equipment Rental Reserve Public Safety Communications 450,000 450,000 - 450,000 Equipment Rental Reserve Fire Capital 640,000 640,000 460,000 - 1,100,000 Equipment Rental Reserve Page 5 of 5 Yakima.9606.1.TSO_Q3_2017.xlsx