HomeMy WebLinkAbout08/21/2018 06D 2nd Quarter 2018 Treasury ReportBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDASTATEMENT
1
Item No. 6.D.
For Meeting of: August 21, 2018
ITEM TITLE: 2nd Quarter2018 Treasury Report
SUBMITTED BY: Tara Lewis, Financial Services Manager
Jennifer Morris, Financial Services Officer
SUMMARY EXPLANATION:
The Treasury Report for the second quarter of 2018 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
O Q2 2018 Treasury Narrative 8/10/2018
O 02 2018 Treasury Report /9/2018
Type
Coyer Memo
Exhibit
2
3
Memorandum
To: The Honorable Mayor and Members of City Council
From: Jennifer Morris, Financial Services Officer
Date: 8/21/2018
Re: 2018 — 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 increased by several new acquisitions to replace investments that
had recently matured and to invest excess cash balances on hand. Interest rates are continuing to
rise 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 four times since late 2015. On March 21St, 2018 the Feds raised the rate again
another 25 basis points to 1.50% and again June 14th to 1.75% the highest it has been since
October of 2008. The Federal Open Market Committee held a meeting August 1st and decided to
leave the federal funds rate unchanged. The next meeting is scheduled for September26th and a
80% chance of another rate hike.
During last quarter one investment was called or matured. The coupon rates were paying 1.32%,
these funds were reinvested at 2.9% which is considerably higher than previous quarters.
The LGIP (Local Government Investment Pool) earnings rate continued to rise in 2017 from 0.64%
last January to 1.28% in December. LGIP continues to rise and currently is at 1.895%. 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 15% of the total portfolio as of
6/30/2018. 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 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.
4
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 General Obligation principal payments were made totaling almost $2.9 million in
overall debt reduction. The $3.6 million Street Project Demonstration Bond was refunded due to an
interest rate reset. The debt was refunded by North Cascades Bank. The City was able to secure a
longer term and a better rate by switching banks. The debt will no longer be subject to rate resets
and will mature in 2028.
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). These temporary
loans are subsequently approved by Council Resolution. 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.
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
June 30, 2018
Description
Qty
Par
Book
Percent of
Portfolio
Average
Yield Q1 '18
Average
Yield Q1 '18
Cash Balances on Hand in Banks
NA
$ 12,750,859
NA
NA
NA
Local Government Investment Pool (LGIP)
1
$ 9,255,597
$ 9,255,597
15%
1.49%
1.80%
Federal Agency Coupon and Discount
21
53,982,000
52,479,152
84%
1.66%
1.77%
Other Investments
2
458,437
458,437
1%
1.10%
1.10%
Total Invested
24
$ 63,696,034
$ 62,193,186
100%
1.63%
1.77%
Summary of Investment Activity
Book Balance
4/1/2018
Purchases
& Deposits
Interest Maturities, Calls Book Balance
Reinvested & Withdrawals 6/30/2018
Local Government Investment Pool (LGIP)
Federal Agency Coupon and Discount
Other Investments
$ 7,221,253
49,785,907
458,247
$ 2,000,000 $ 34,343 $
3,990,400
191
- $ 9,255,597
1,297,155 52,479,152
458,437
Totals
$ 57,465,407 $ 5,990,400 $ 34,534 $ 1,297,155 $ 62,193,186
Page 1 of 5
Yakima.10592.1.Copy_of_TSO_Q2_2018.xlsx
Page 2 of 5
City of Yakima
Investment Portfolio - Inventory by Agency
June 30, 2018
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
1489 3,000,000 2,996,247 1.250 1.290 8/19/19 6/3/16 8/19/18 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 9/14/18 Amer 3/14/22
1504 4,000,000 3,990,400 2.970 3.023 4/10/23 6/14/18 4/10/19 Amer 4/10/23
FFCB Totals and Average Yield 12,015,000 11,975,000
2.120
Federal Home Loan Bank
FHLB 1492 2,030,000 1,994,020 1.500 1.880 11/9/21 12/14/16 11/9/18 Amer 11/9/21
The Public Safety Communicatior 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
FHLB To 1495 2,137,000 1,995,637 1.821 1.821 1/15/21 01/15/21 1/15/21 NC 1/15/21
FHLB To 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 10/06/17 7/15/20 NC 1/15/21
RFCSP 1500 2,667,000 2,499,062 2.200 2.200 1/15/21 01/25/18 1/15/21 NC 1/15/21
RFCSP 1502 2,122,000 1,999,174 2.250 2.250 10/15/20 02/14/18 7/15/20 NC 10/15/20
#REF! 1503 3,139,000 3,037,265 2.011 2.011 10/15/19 02/14/18 7/15/20 NC 10/15/19
RFCSP Totals and Average Yield 19,516,000 18,475,661 1.863
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 1/22/19 Qrty 5/22/20
FNMA 1490 2,000,000 1,995,048 1.500 1.552 6/30/21 6/30/16 6/30/19 Qrty 6/30/21
FNMA 1491 2,000,000 1,997,896 1.500 1.520 12/30/21 6/30/16 12/30/18 Qrty 12/30/21
FNMA 1494 2,010,000 1,995,172 1.350 1.560 7/28/20 12/14/16 7/28/18 Qrty 7/28/20
FNMA 1501 1,000,000 997,351 2.300 2.380 7/30/21 12/14/16 7/30/18 Qrty 7/30/21
FNMA Totals and Average Yield 13,010,000 12,977,115 1.484
Financing Corporation
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 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 7,411,000 7,057,356
1.414
Other Investments
LGIP LGIP
YFED 1473
YF -CD 1447
9,255,597 9,255,597 1.802 1.802 NA NA NA NC NA
177,520 177,520 0.400 0.400 NA 7/1/13 NA NC NA
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 9,714,034 9,714,034
1.769
Yakima.10592.1. Copy_of_TSO_02_2018.xlsx
7
City of Yakima
Investment Portfolio - Detail of Activity
June 30, 2018
Agency
Beginning Additions and Calls and Ending Date of
Inv# Face Value Purchases Maturities Face Value Activity
Federal Farm Credit Bureau
FFCB 1489 3,000,000 3,000,000
FFCB 1496 2,015,000 2,015,000
FFCB 1498 3,000,000 3,000,000
FFCB 1504 - 4,000,000 4,000,000
FFCB Totals
8,015,000 4,000,000 12,015,000
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
RFCSP 1500 2,667,000 2,667,000
RFCSP 1502 2,122,000 2,122,000
RFCSP 1503 3,139,000 3,139,000
FHLMC Totals
19,516,000 19,516,000
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 1501 1,000,000 1,000,000
FNMA Totals
13,010,000 13,010,000
Financing Corporation
FICO 1478 1,366,000 (1,366,000) 5/2/18
FICO 1482 2,100,000
FICO 1485 2,119,000
FICO 1486 3,192,000
2,100,000
2,119,000
3,192,000
FICO Totals
8,777,000 (1,366,000) 7,411,000
Other Investments
LGIP (State Pool) LGIP 7,221,253 2,034,343
Yakima Federal Savings 1473 177,330 191
Yakima Federal CD 1447 280,917
9,255,597
177,520
280,917
Other Investment Totals
7,679,500
2,034,534
9,714,034
Grand Totals $ 59,027,500 $ 6,034,534 $ (1,366,000) $ 63,696,034
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Yakima.10592.1.Copy_of_TSO_Q2_2018.xlsx
City of Yakima
Bonded Debt Schedule - by Project Group
June 30, 2018
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
6/20/2013 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 Project Demonstration (Refunded)
Street Resurfacing Project
Comm Center Move
Soccer Complex
Refunded 1996 issue $ 4,175,000 $ 730,000 $
Partial refunding of 2002 issue 4,910,000 3,110,000
Tax exempt portion 2,055,000 250,000
Build America Bonds (Taxable) 4,980,000 4,980,000
Deferred Interest -Maturity $2.5M 1,430,528 393,790
Ladder Truck 760,000 270,000
Remodel Facility 815,000 270,000
Ped crossing, street, infrastructure 2,190,000 455,000
Renovate downtown improvements 1,490,000 490,000
River Road improvements 1,765,000 -
Various City street improvements 5,000,000 -
Various City street improvements 3,500,000 3,500,000
Streets improvements 13,140,000 8,640,000
City portion of County GO Bonds 1,716,500 1,465,000
City portion of SOZO Sports Complex 5,000,000 4,388,507
325,000
60,000
110,000
3,551,510
1,245,000
70,000
124,409
Subtotal General Obligation Bonds
$ 52,927,028 $
28,942,297 $ 5,485,919
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 $
459,602
576,847
310,414
2,189,736
769,792 $
84,779
194,141
173,521
2,052,534
732,241
80,643
29,795
137,202
Subtotal Certificates of Participation
7,709,790 $
3,274,768 $
979,881
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 $
5,440,000
1,883,951
5,215,000
6,115,000 $
3,345,000
220,000
3,680,000
Subtotal Revenue Bonds
$ 21,938,951 $
13,360,000 $
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Yakima.10592.1.Copy_of_TSO_Q2_2018. xlsx
City of Yakima
Interfund Borrowing
June 30, 2018
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 $ 109,803 $
450,000 450,000
640,000 1,100,000
500,000
- $ 6,922 $ 102,881 Equipment Rental Reserve
450,000 Equipment Rental Reserve
1,100,000 General Fund
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.
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