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06/05/2012 04C 1st Quarter 2012 Treasury Report J R {" BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. For Meeting of: June 5, 2012 is ITEM TITLE: 1st Quarter 2012 Treasury Report SUBMITTED BY: Cindy Epperson, Director of Finance and Budget CONTACT Cindy Epperson, Director of Finance and Budget, 575 - PERSON /TELEPHONE: 6070 Tara Lewis, Financial Services Manager, 576 -6639 SUMMARY EXPLANATION: The Treasury Report for the first quarter of 2012 consists is attached and consists of the following: 1. 1st Quarter 2012 Summary and Narrative 2. Reports (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 of the Narrative for a description of Treasurer's Reports. Resolution Ordinance Other Report (specify) Contract: Mail to: Contract Term: Amount: Expiration Date: Insurance Required? No Funding Phone: Source: APPROVED FOR SUBMITTAL: City Manager STAFF RECOMMENDATION: Accept report. BOARD /COMMISSION RECOMMENDATION: ATTACHMENTS: Click to download 0 Narrative-Treasurers Report 0 1st Qtr 2012 Treasury Report City of Yakima FINANCE DEPARTMENT 1 Quarter 2012 Treasury Report — Summary and Narrative June 5, 2012 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 categories: 1) A Liquidity Portfolio of overnight investments. This category generally consists only of funds invested in the Local Government Investment Pool (LGIP) managed by the State Treasurer. 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 3/31/12 was 1.31%, which is up ever so slightly from 2011 yields that ranged from 1.14% to 1.28 %. The LGIP continues to be quite dull at 0.13 %, earning us a mere $600 to $700 per month on just over $6 million. The security portfolio earned 1.51% as compared to 1.48% from the 4 quarter of 2011 and was entirely responsible for the minor bump in yield. It should be noted that this increase is arbitrary due to the call feature being executed on some of the lower yielding securities in the portfolio. Currently, every one of our investment securities is yielding higher than the current marketplace. This means that our yield will continue to fall as securities are called and reinvestment can only be done at lower yields. The City has used a strategy of purchasing longer term (up to 5 year) callable maturities to enjoy a slightly higher yield with the expectation that the call feature will be exercised. This strategy is fairly effective as long as rates are falling or steady. However, an aggressive use of this strategy can backfire when rates rise, leaving the investor with a portfolio full of longer term maturities that are below market rates. A dramatic 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 14% of the total portfolio as of quarter end. The yield continues to be very low at approximately 13.6 basis points (0.136 %) in March. 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, and includes mostly Federal Agency Callable Bonds with an average yield of 1.51%. 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 2.10% through February 2015. 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. Bonded Debt The City is in the process of refunding the 2003 Series B Water and Sewer Revenue Bonds. Much for the same reason that our investments are being called, the City can benefit on the debt side of the current interest rate environment. In refinancing our 2003 B bonds we will be exercising the call feature on those who are holding them as investments and using the refinancing proceeds to pay them off. We will achieve interest savings and real cash savings over the remaining life of the bonds. Savings from refinancing are estimated to be about $1.2 million over the life of the bonds since the true interest cost decreased from 4.67% to 2.15 %. 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 March 31, 2012 Percent of Average Average Investment Category Qty Par Book Portfolio Yield Q1 '12 Yield Q4 '11 Local Government Investment Pool (LGIP) 1 $ 6,092,283 .$ 6,092,283 14% 0.13% 0.13% Federal Agency Coupon and Discount 19 35,133,000 35,167,655 84% 1.51% 1.48% Other Investments 2 750,000 815,490 2% 1.77% 1.96% Totals 22 $ 41,975,283 $ 42,075,428 100% 1.31% 1.21% Book Balance Purchases Interest Maturities, Calls Book Balance Summary of Activity 1/1/2012 & Deposits Reinvested & Withdrawals 3/31/2012 Local Government Investment Pool (LGIP) $ 6,090,274 $ - $ 2,009 $ 6,092,283 Federal Agency Coupon and Discount 35,006,959 7,169,618 - 7,008,922 35,167,655 Other Investments 815,490 - - 815,490 Totals $ 41,912,723 $ 7,169,618 $ 2,009 $ 7,008,922 $ 42,075,428 Page " , 6 PDFConvert.1163.1.TSO_Q' 1.xlsx City of Vakima Investment Portfol Tentory by Agency - Marc,. , 2012 Expected Call Most Agency Fund Inv# Face Value Price Coupon Step Yield Maturity Settle Next Call Type Likely Call Federal Home Loan Bank FHLB 896 1456 2,000,000 2,289,700 5.630 2.050 6/13/16 3/12/12 6/13/16 NC 6/16/16 FHLB Totals and Average 2,000,000 2,289,700 2.050 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 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 896 1453 2,000,000 2,001,920 1.300 1.250 1/30/17 01/30/12 1/30/14 Qrty 1/30/14 FHLMC Totals and Average 8,800,000 8,805,142 1.671 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 ix 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 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 ix 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 lx 9/14/12 FNMA 896 1452 1,000,000 1,000,000 0.850 0.850 12/5/14 12/5/11 12/5/13 lx 12/5/13 FNMA Totals and Average 19,255,000 19,265,936 1.448 Financing Corporation FICO 896 1450 2,000,000 1,928,880 1.000 1.020 5/11/15 10/20/11 5/11/15 NC 5/11/15 FICO 896 1454 722,000 678,045 1.200 1.200 5/2/17 2/2/12 5/2/17 NC 5/2/17 FICO 896 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 Totals and Average 5,078,000 4,806,878 1.195 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 2.050 2.100 3/30/16 3/31/11 3/30/12 : NC 3/30/12 Other Totals and Average 750,000 815,490 1.775 'Grand Totals $ 35,883,000 $ 35,983,145 1.514 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% City of Yakima Investment Portfolio - Detail of Activity For the Quarter Ended March 31, 2012 Coupon Beginning Calls and Ending Date 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) - 3/30/12 FFCB Totals 1,000,000 - (1,000,000) - Federal Home Loan Bank FHLB 896 1456 2.050 2,000,000 2,000,000 3/12/12 FHLB Totals - 2,000,000 - 2,000,000 Federal Home Loan Mortgage Corporation FHLMC 896 1429 2.000 1,000,000 1,000,000 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) - 2/24/12 FHLMC 896 1451 1.500 2,000,000 2,000,000 FHLMC 896 1453 1.300 2,000,000 2,000,000 1/30/12 FHLMC Totals 9,800,000 2,000,000 (3,000,000) 8,800,000 Federal National Management Association 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) - 3/12/12 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 FNMA Totals 22,255,000 - (3,000,000) 19,255,000 Financing Corporation FICO 896 1450 1.020 2,000,000 2,000,000 FICO 896 1454 1.200 722,000 722,000 2/2/12 FICO 896 1455 1.348 2,356,000 2,356,000 2/29/12 FICO Totals 2,000,000 3,078,000 - 5,078,000 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 $ 35,805,000 $ 7,078,000 $ (7,000,000) $ 35,883,000 i Page 3 of 6 PDFConvert .1163.1.TSO_Q1_2012.xlsx CITY OF YAKIMA REPORT OF CASH BALANCES March 31, 2012 Key Bank $ 6,118,166 - Barik of New York (Fiscal Agent)(1) - U.S. Bank (Housing loan repayments) 426,955 Yakima Federal Savings and Loan Association (Housing) 171,746 Bank of America (Claims Control) 1,123,791 U. S. Bank (Payroll Control) 10,215 U.S. Bank Electronic Deposits 647,598 Inmate Trust - Key Bank 10,469 Inmate Welfare - Key Bank 7,398 Municipal Court - Key Bank 125,259 • 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 $ 8,661,151 1 Balance is zero as all 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 .1163.1.TSO_Q1_2012.xlsx City of Yakima Bond Schedule - by Project Group For the Quarter Ended March 31, 2012 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 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 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 6/17/2003 12/1/2013 Law and Justice Center Refunded1994 issue 4,155,000 985,000 9/7/2004 12/1/2014 Fire Station Refunded 1995 issue (voted issue) 2,300,000 825,000 8/28/2008 12/1/2021 Fire Apparatus Ladder Truck 760,000 605,000 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 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 Subtotal General Obligation Bonds $33,060,528 $22,723,268 $0 Revenue Bonds 12/2/2003 11/1/2014 Wastewater $7,390,000 $1,835,000 12/2/2003 11/1/2023 Wastewater Being refunded May 2012 10,155,000 10,155,000 6/5/2008 11/1/2027 Wastewater 5,440,000 4,770,000 6/5/2008 11/1/2018 Water Refunded 1998 issue 1,883,951 1,385,000 9/4/2004 9/1/1934 Irrigation 5,215,000 4,465,000 Subtotal Revenue Bonds $30,083,951 $22,610,000 $0 IGrand Total $63,144,479 $45,333,268 $0 Page 5 of . PDFConvert .1163.1.TSO_ ,21_2012.x1sx r CITY uF YAKIMA LID Schedule For the Quarter Ended March 31, 2012 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 $ 45,000 $ - $ 45,000 Equipment Rental 1057 - N 84th & Hawthorne - 179,550 67,000 - 67,000 Equipment Rental 1058 - N 95th, 94th Place - 160,869 57,000 - 57,000 Equipment Rental 1060 - 85th and Kail 12,249 375,881 178,000 - 178,000 Equipment Rental 1061- Simpson Lane 55,601 497,728 381,000 - 381,000 Equipment Rental Totals $ 67,850 $ 1,432,509 $ 728,000 $ - $ - $ 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 80,089 Amount above (below) targeted minimum $ 7,289 Page 6 of 6 PDFConvert .1163.1.TSO_Q1_2012.xlsx