03/06/2012 04C 4th Quarter 2011 Treasury Report Pk- ? ' til
• ,i)
-
kti ,
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. ‘4C,
For Meeting of: March 6, 2012
ITEM TITLE: City of Yakima - 4th Quarter 2011 Treasury Report
SUBMITTED BY: Cindy Epperson, Acting Director of Finance and
Budget
CONTACT Cindy Epperson, Acting Director of Finance and
PERSON/TELEPHONE: Budget, 575 - 6070
Tara Lewis, Financial Services Officer, 576 - 6639
SUMMARY EXPLANATION:
The Treasury Report for the fourth Quarter of 2011 consists of the following: (1)
• Investment Portfolio - Summary
• Investment Portfolio - Detailed Inventory by Agency
• Investment Portfolio - Detail of Activity
• Report of Cash Balances
• Schedule of Outstanding General Obligation & Revenue Bonds
• LID Cash Balances, & LID Bonds & Notes Payable
(1) Refer to final page for a description of Treasurer's Reports.
Resolution Ordinance Other Report
(specify)
Contract: Mail to:
Contract Term: Amount: Expiration Date:
Insurance Required? No
Funding
Source: Phone:
APPROVED FOR C Manager
SUBMITTAL:
STAFF RECOMMENDATION:
Accept report.
BOARD /COMMISSION RECOMMENDATION:
ATTACHMENTS:
Click to download
❑ Treasurer's Narrative
❑ Treasurers Reports
City of Yakima
FINANCE DEPARTMENT
STAFF REPORT
March 6, 2012
SUBJECT: City of Yakima — 4 Quarter 2011 Treasury Report
SUBMITTED BY: Cindy Epperson, Acting Director of Finance and Budget
CONTACT PERSON: Cindy Epperson, Acting Director of Finance and Budget, 575 -6070
Tara Lewis, Financial Services Officer, 576 -6639
SUMMARY EXPLANATION:
The Treasury Report for the fourth Quarter of 2011 consists of the following: (
• Investment Portfolio - Summary
• Investment Portfolio - Detailed Inventory by Agency
• Investment Portfolio — Detail of Activity
• Report of Cash Balances
• Schedule of Outstanding General Obligation & Revenue Bonds
• LID Cash Balances, & LID Bonds & Notes Payable
(1) Refer to final page for a description of Treasurer's Reports.
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 9/06/11.
Snapshot of the Portfolio
The City's Investment Portfolio can be divided into two general buckets:
1) A Liquidity Portfolio of overnight investments.
2) A Security Portfolio of investments in 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 the quarter ending 12/31/11 was
1.25 %, fairly consistent with the third and second quarters of 1.21% and 1.28% respectively,
and up slightly from the 1.14% earned in the first quarter of 2011.
Short term investment rates continue to be significantly lower than the average yields currently
being realized. (The short term Local Government Investment Pool managed by the State is
currently yielding 0.13% versus yield -to -call rates between 0.80% and 1.00% on 5 year Agency
Callable bonds.) It should be noted that the yields being obtained currently are due primarily to
our strategy of purchasing longer term, callable securities, which pay higher rates. As expected,
most of these Agencies are exercising the call feature in their bonds to take advantage of lower
shorter term rates; thus we purchase securities with higher interest rates, which turnover more
quickly.
Our current strategy rests on the expectation that 5 year securities will be called due to a higher
coupon rate than the current market interest rates. This is what the City is experiencing without
exception. The risk associated with such a strategy is that if the rates rebound suddenly, the
bonds will not be called and the bonds will go to maturity at a rate lower than market. Such a
spike in rates is considered a remote possibility in our current economic environment. However,
due to this risk, the City is quite cautious in the use of Agency Callable securities. Fewer and
fewer "deals" with higher coupons are becoming available as mid -term rates (up to 5 years)
have become fairly stagnant as well.
The Liquidity Portfolio is invested predominately with the State of Washington Investment Pool
and was 15% of the total portfolio as of 12/31/11. The yield continues to be very low at
approximately 12.1 basis points (i.e. 0.121%) in December. As funds have been needed for
operations, draws from the pool have not been replaced due to the cost of transferring funds
relative to the low interest rates. Higher cash balances are being maintained in the City's
general accounts to offset banking fees since the credit given for such balances is at a higher
rate than the State Pool is paying. Such cash balances are presented on page 4 of the financial
report section of this report. These cash balances are not considered to be part of the Liquidity
Portfolio, but do generate interest earnings for the City after offsetting bank service fees.
The Security Portfolio currently comprises 86% of the total, comprised mostly of Federal Agency
Callable Bonds with an average yield of 1.43 %, compared to 1.50% in the third quarter of 2011.
Agency yields continue downward due to the call feature which enables the agency to refinance
at lower rates as time passes. This trend became noticeable in the City's investment portfolio in
late 2009 and has continued steadily through the current day. The trend is expected to continue
as rates remain soft into the next several quarters. Within the Security Portfolio is a new
category termed "Other Investments." There are currently two investments in this category: 1) a
$500,000 - 5% coupon Bond issued by Grays Harbor County purchased at a premium to
generate an effective yield of 1.631% through July 2015, and 2) a $250,000 certificate of deposit
(PDPC insured) yielding 2.693% through March 2016.
Income from investments and cash balances has been decreasing for several years due to
market and economic conditions. Cash and cash equivalent balances (investable cash) have
remained fairly constant while earnings rates have dropped significantly. Reduced earnings
continue to have a negative impact on the budget. Total interest earned over the past several
years is as follows 2009 - $2,020,813, 2010 - $969,996; 2011 - $609,273; 2012 budgeted -
$537,410.
Investment Composition Strategy
The City looks to maintain an Investment Portfolio with a Liquidity Portfolio sufficient to cover
cash flow needs and provide a cushion for unusual and emergency expenditures.
The Security Portfolio contains predominately callable US government agency securities.
Callable agency securities serve three purposes:
(1) The City earns a higher coupon (yield) than it would have earned from a non - callable
security with the same maturity date and same issuer;
(2) The actual experienced maturity of a callable security is usually shorter than its stated
maturity due to its inherent call features. Calls on existing securities allow for a certain amount
of investment flexibility which can lead to higher current interest income much sooner than if the
securities were non - callable;
(3) By buying US Agency callable securities, the City's security investments have the direct or
implied backing of the US Government and as such, any of the City's securities could be sold
immediately at current market prices for cash if the need arose.
The City owns securities issued by US government- backed entities such as the Federal Home
Loan Bank ( "FHLB "), Freddie Mac ( "FHLMC "), Fannie Mae ( "FNMA "), and Federal Farm Credit
( "FFCB "). While the public stock of FHLMC and FNMA are currently suffering, they do have
lines of credit with, investment by, and the support of the US Treasury. The City's risk of Toss
due to credit exposure from any of these agencies is thought to be miniscule.
The City does not invest in any Structured Investment Vehicles (SIV's), Collaterized Mortgage
Obligations (CMO's), or Collateralized Debt Obligations (CDO's). These types of investments,
along with certain asset - backed Commercial Paper have much higher price and demand
volatility. The City has not purchased these types of instruments.
Description of Treasurer's Reports
• Investment Portfolio - Summary
This report shows a summary of investments by type including the percentage of each
category relative to the total portfolio. A summary of activity shows by category the
balances at the beginning of the reporting period, activity that occurred during the
quarter and ending balances as of the report date.
• Investment Portfolio — Detailed Inventory by Agency
This report lists all of the City's major security investments excluding funds in the State of
Washington Investment pool as of the report date.
• Investment Portfolio — Detail of Activity
This report contains detailed lists of security purchases, maturities and calls during the
reporting period.
• Report of Cash Balances
A list of cash balances in each of the City's major bank accounts.
• Schedules of General Obligation & Revenue Bonds Payable
This report indicates principal payments made during the reporting period, and the
current balances of the City's bonded debt.
• LID Cash Balances, LID Bonds & Notes Payable, LID Guaranty Fund
A Local Improvement District is an instrument utilized by citizens to fund specific local
community improvements. This report identifies outstanding obligations relative to Local
Improvement Districts' bonds and notes payable. Once a Local Improvement District
bond or note is issued, there is a required minimum reserve which the City must maintain
so long as the bond or note is outstanding. This report also compares the current Local
Improvement Districts outstanding debt to the required reserve balance.
City of Yakima
Investment Portfolio - Summary
December 31, 2011
Percent of Average Average
Investment Category Qty Par Book Portfolio Yield Q4 '11 Yield Q3 '11
Local Government Investment Pool (LGIP) 1 $ 6,090,274 $ 6,090,274 15% 0.13% 0.15%
Federal Agency Coupon and Discount 18 35,055,000 35,006,960 84% 1.43% 1.50%
Other Investments 2 750,000 815,490 2% 1.96% 1.96%
Totals 21 $ 41,895,274 $ 41,912,724 100% 1.25% 1.21%
Book Balance Purchases Interest Maturities, Calls Book Balance
Summary of Activity 10/1/2011 & Deposits Reinvested & Withdrawals 12/31/2011
Local Government Investment Pool (LGIP) $ 10,087,861 $ - $ 2,413 $ 4,000,000 $ 6,090,274
Federal Agency Coupon and Discount 34,065,357 4,931,602 - 3,990,000 35,006,959
Other Investments 815,490 - - 815,490
Totals $ 44,968,708 $ 4,931,602 $ 2,413 $ 7,990,000 $ 41,912,723
Page 1 of 6 PDFConvert .884.1.TSO_Q4_2011.xlsx
City c la
Investment Portfolio - ...ventory by Agency
December 31, 2011
Expected Call Most
Agency Fund Inv# Face Value Price Coupon Step Yield Maturity Settle Next Call Type Likely Call
Federal Farm Credit Bank
FFCB 896 1426 1,000,000 998,500 2.540 2.693 3/30/16 3/31/11 3/30/12 Amer 3/30/12
FFCB Totals and Average 1,000,000 998,500 2.693
Federal Home Loan Mortgage Corporation
FHLMC 896 1429 1,000,000 1,000,500 2.000 1.949 12/1/15 06/01/11 6/1/12 lx 6/1/12
FHLMC 896 1438 2,000,000 2,000,000 2.000 2.000 8/8/16 08/08/11 2/8/13 lx 2/8/13
FHLMC 896 1440 1,800,000 1,800,000 2.000 2.000 8/17/16 08/17/11 8/17/12 lx 8/17/12
FHLMC 896 1441 3,000,000 3,010,422 2.200 1.500 8/24/16 08/24/11 2/24/12 Amer 2/24/12
FHLMC 896 1451 2,000,000 2,002,722 1.500 1.330 9/21/16 11/29/11 9/21/12 lx 9/21/12
FHLMC Totals and Average 9,800,000 9,813,644 1.705
Federal National Management Association
FNMA 896 1427 1,000,000 997,500 2.050 2.304 4/20/15 4/20/11 4/20/12 lx 4/20/12
FNMA 896 1430 2,000,000 2,001,000 2.250 2.199 6/6/16. 6/6/11 6/6/12 lx 6/6/12
FNMA 896 1433 1,615,000 1,627,436 2.250 1.463 6/6/16 6/10/11 6/6/12 lx 6/6/12
FNMA 896 1439 1,640,000 1,640,000 2.000 2.000 8/17/16 8/17/11 8/17/12 lx 8/17/12
FNMA 896 1443 3,000,000 3,000,000 1.000 Step 1.000 9/14/16 9/14/11 9/14/12 Qtry 9/14/12
FNMA 896 1444 3,000,000 3,000,000 0.850 0.850 9/12/14 9/12/11 3/12/12 Qtry 9/12/14
FNMA 896 1445 4,000,000 4,000,000 1.420 1.420 9/20/16 9/20/11 9/20/13 lx 9/20/13
FNMA 896 1446 2,000,000 2,000,000 1.500 1.500 9/21/16 9/21/11 9/21/12 lx 9/21/12
FNMA 896 1448 1,750,000 1,750,000 1.000 1.000 9/15/15 _ 9/9/11 9/9/13 lx 9/9/13
FNMA 896 1449 1,250,000 1,250,000 1.000 1.000 9/14/15 9/14/11 9/14/12 1x 9/14/12
FNMA 896 1452 1,000,000 1,000,000 0.850 1.000 12/5/14 12/5/11 12/5/13 lx 12/5/13
FNMA Totals and Average 22,255,000 22,265,936 1.374
Financing Corporation
FICO 896 1442 2,000,000 1,928,880 1.000 1.020 5/11/15 10/20/11 5/11/15 NC 5/11/15
FICO Totals and Average 2,000,000 1,928,880 1.020
Other Investments
CNTY 896 1442 500,000 565,490 5.000 1.631 7/1/15 8/19/11 7/1/15 NC 7/1/15
YF -CD 896 1447 250,000 250,000 2.540 2.693 3/30/16 3/31/11 3/30/12 NC 3/30/12
FFCB Totals and Average 750,000 815,490 1.957
1 Grand Totals $ 35,805,000 $ 35,822,450 1.441 Average Expected Yield
Coupon Steps Investment # Rate up to: 2013 2013 2014 2014 2015 2015 2016 2016
1443 Mar & Sept 14 .1.000 % 1.125% 1.250% 1.500% 1.750% 2.250% 2.750% 3.500%
Page 2 of 6 PDFConvert.884.1.TSO_Q4 2011.xlsx
City of Yakima
Investment Portfolio - Detail of Activity
For the Quarter Ended December 31, 2011
Coupon Beginning Calls and Ending Date of
Agency Fund Inv# Rate Face Value Purchases Maturities Face Value Activity
Federal Farm Credit Bureau
FFCB 896 1426 2.540 1,000,000 1,000,000
FFCB Totals 1,000,000 - - 1,000,000
Federal Home Loan Mortgage Corporation
FHLMC 896 1429 2.000 1,000,000 1,000,000
FHLMC 896 1435 2.125 2,000,000 (2,000,000) - 12/16/11
FHLMC 896 1438 2.000 2,000,000 2,000,000
FHLMC 896 1440 2.000 1,800,000 1,800,000
FHLMC 896 1441 2.200 3,000,000 3,000,000
FHLMC 896 1451 1.500 2,000,000 2,000,000 11/29/12
FHLMC Totals 9,800,000 2,000,000 (2,000,000) 9,800,000
Federal National Management Association
FNMA 896 1423 1.125 2,000,000 (2,000,000) - 10/29/11
FNMA 896 1427 2.050 1,000,000 1,000,000
FNMA 896 1430 2.250 2,000,000 2,000,000
FNMA 896 1433 2.250 1,615,000 1,615,000
FNMA 896 1439 2.000 1,640,000 1,640,000
FNMA 896 1443 1.000 3,000,000 3,000,000
FNMA 896 1444 0.850 3,000,000 3,000,000
FNMA 896 1445 1.420 4,000,000 4,000,000
FNMA 896 1446 1.500 2,000,000 2,000,000
FNMA 896 1448 1.000 1,750,000 1,750,000
FNMA 896 1449 1.000 1,250,000 1,250,000
FNMA 896 1452 0.850 1,000,000 1,000,000 12/5/11
FNMA Totals 23,255,000 1,000,000 (2,000,000) 22,255,000
Financing Corporation
FICO 896 1450 1.020 2,000,000 2,000,000 10/20/11
FICO Totals - 2,000,000 - 2,000,000
Other Investments
Grays County Bonds 896 1442 5.000 500,000 500,000
Yakima Federal CD 896 1447 2.050 250,000 250,000
Other Investment Totals 750,000 - - 750,000
Grand Totals $ 34,805,000 $ 5,000,000 $ (4,000,000) $ 35,805,000
Page 3 of 6 PDFConvert .884.1.TSO_Q4_2011.xlsx
CITY OF YAKIMA
REPORT OF CASH BALANCES
December 31, 2011
Key Bank $ 7,192,223
Bank of New York (Fiscal Agent)(1) -
U.S. Bank (Housing loan repayments) 399,965
Yakima Federal Savings and Loan Association (Housing) 170,882
Bank of America (Claims Control) 2,226,187
U. S. Bank (Payroll Control) 11,392
U.S. Bank Electronic Deposits 2,628,462
Inmate Trust - Key Bank 9,593
Inmate Welfare - Key Bank 8,812
Municipal Court - Key Bank 109,498
Petty Cash (2) 3,475
Police - Special Investigations(2) 7,500
Change Funds (3) 3,780
Travel Advance 4,800
Total Cash On Hand and in Bank Accounts $ 12,776,570
1 Balance is zero as alI coupons and principal has been paid to bond holders.
2 Represents imprest amounts. Cash on hand plus receipts for paid items equals this amount
per Resolution R2011 -58
3 Change for customers established by Resolution R2011 -58
Page 4 of 6 PDFConvert .884.1.TSO_Q4_2011.x1sx
City of Yakima
Bond Schedule - by Project Group
For the Quarter Ended December 31, 2011
Final Amount Current Redeemed
Date Issued Payment Description Note Issued Balance Due This Quarter
General Obligation Bonds
5/8/2007 6/1/2012 PFD Convention Center I Unrefunded portion of 2002 issue $1,280,000 $235,000
9/7/2004 11/1/2019 PFD Convention Center II Refunded 1996 issue 4,175,000 2,820,000 305,000
5/8/2007 5/1/2026 PFD Convention Center III Partial refunding of 2002 issue 4,910,000 4,870,000
8/28/2009 12/1/2018 PFD Capitol Theatre Tax exempt portion 2,055,000 1,515,000 185,000
8/28/2009 12/1/2024 PFD Capitol Theatre Build America Bonds (Taxable) 1,755,000 1,755,000
8/28/2009 12/1/2032 PFD Capitol Theatre Build America Bonds (Taxable) 3,225,000 3,225,000
6/17/2003 12/1/2023 Sundome Expansion Deferred Interest - Maturity $2.5M 1,430,528 943,268 112,419
6/17/2003 12/1/2013 Law and Justice Center Refunded1994 issue 4,155,000 985,000 470,000
9/7/2004 12/1/2014 Fire Station Refunded 1995 issue (voted issue) 2,300,000 825,000 255,000
8/28/2008 12/1/2021 Fire Apparatus Ladder Truck 760,000 605,000 50,000
5/8/2007 5/1/2022 Fire Station Remodel Facility 815,000 645,000
8/28/2008 12/1/2019 Infrastructure Projects Ped crossing, street, infrastructure 2,190,000 1,635,000 175,000
5/8/2007 5/1/2022 Downtown Futures Renovate downtown improvements 1,490,000 1,175,000
5/8/2007 5/1/2017 River Road River Road improvements 1,765,000 1,150,000
12/1/2005 12/1/2015 Parks and Recreation Parks improvements 755,000 340,000 75,000
Subtotal General Obligation Bonds $33,060,528 $22,723,268 $1,627,419
Revenue Bonds
12/2/2003 11/1/2014 Wastewater $7,390,000 $1,835,000 $750,000
12/2/2003 11/1/2023 Wastewater 10,155,000 10,155,000
6/5/2008 11/1/2027 Wastewater 5,440,000 4,770,000 205,000
6/5/2008 11/1/2011 Water /Wastewater Refunded 1998/1991 issue 1,516,049 0 525,000
6/5/2008 11/1/2018 Water Refunded 1998 issue 1,883,951 1,385,000 170,000
9/4/2004 9/1/1934 Irrigation 5,215,000 4,465,000
Subtotal Revenue Bonds $31,600,000 $22,610,000 $1,650,000
(Grand Total $64,660,528 $45,333,268 $3,277,419
Page 5 PDFConvert.884.1.TSO_Q .xlsx
CITY OF YAKIMA
LID Schedule
For the Quarter Ended December 31, 2011
LID CASH BALANCES LID BONDS AND NOTES PAYABLE
LID Current LID Original LID Bond /Note Amount New LID LID Bond /Note
District District Bond /Notes Beginning Quarter Bonds /Notes Districts Ending Quarter Investment Of
No. Cash Balance Assessment Balance Paid Added Balance
1056 - S 7th, 8th, 9th $ - $ 218,481 $ 50,000 $ 5,000 $ - $ 45,000 , Equipment Rental
1057 - N 84th & Hawthorne - 179,550 72,000 5,000 - 67,000 Equipment Rental
1058 - N 95th, 94th Place - 160,869 58,000 1,000 - 57,000 Equipment Rental
1060 - 85th and Kail - 375,881 180,000 2,000 - 178,000 Equipment Rental
1061- Simpson Lane - 497,728 384,000 3,000 - 381,000 Equipment Rental
Totals $ - $ 1,432,509 $ 744,000 $ 16,000 $ - $ 728,000
Cash Reserve Requirement:
Bonds and Notes Payable to Equipment Rental Fund $ 728,000
x 10%
10% of Outstanding Balance 72,800
Guaranty Fund #221 Cash Balance 79,999
Amount above (below) targeted minimum $ 7,199
Page 6 of 6 PDFConvert.884.1.TSO_Q4_2011.xlsx