HomeMy WebLinkAbout5D - 2nd Quarter Investment Report
4646 Dakota Street S.E.
Prior Lake, MN 55372-1714
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
ISSUES
ALTERNATIVES
RECOMMENDED
MOTION:
CITY COUNCIL AGENDA REPORT
JULY 20, 2009
5D
Jerilyn Erickson, Finance Director
CONSIDER APPROVAL OF 2009 2nd QUARTER INVESTMENT REPORT
Introduction
The purpose of this agenda item is for the council to consider approval of the
investment report for this quarter.
Current Circumstances
Staff has prepared a list of investments as of June 30, 2009. An Investment
Report Summary Narrative provides some supplementary information with
respect to the investments currently held, the allowable forms of investments
permitted by Minnesota Statute, and descriptions of funds established for the
City. In most instances, the balances in each of these funds are either
reserved and restricted for specific expenditures as indicated or sufficient fund
balances are necessary to provide adequate operational cash flows as in the
case with the General Fund and Sewer and Water Fund.
If council members have questions please feel free to contact me at 952-447-
9841 for more information.
1. A motion as part of the consent agenda to approve the 2009 2nd Quarter
Investment Report as submitted.
2. Take no action and provide the staff with specific direction.
Alternative 1. A motion as part of the consent agenda to approve the 2009 2nd
Quarter Investment Report as submitted.
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1. 2009 2nd Quarter Investment Report Summary
2. Investment Report Summary Narrative
www.cityofpriorlake.com
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INVESTMENT REPORT SUMMARY NARRATIVE
The attached Investment Report Summary identifies the various types of investments and the brokerslbanks the
City of Prior Lake uses for investment purposes.
As of June 30, 2009, the balance of the investment portfolio is $24,899,246.14. This is an increase of $4.2M
from March 31, 2009 primarily due to the receipt of bond proceeds and the first half tax settlement. The
weighted average return of the investment portfolio is currently 2.744%, down from 3.53% at the end of first
quarter 2009. What is driving that ROI downward is the large amount that is reflected in the 4M Fund money
market at the end of June. A portion of those funds have been invested in other securities in which the
settlement has taken place in July. A certain level of funds must remain liquid in order meet cash flow needs in
the short-term.
It is challenging right now to find competitive rates for short-term investments---30 to 120-day maturities.
These short-term securities are necessary to meet cash flow needs for payments to vendors (including
construction contracts) and payroll over the next five months until we receive the second half tax settlement.
Current short-term rates being offered by financial institutions are very low. The following table shows the
current money market rate for the 4M Fund and treasury rates:
4M Fund
(4MP) 1 mo 3 mo 6 mo 1 yr
2 yr
3 yr 5 yr
7 yr
10 yr
Current Rates
(7/10/09)
0.31
0.15
0.18 0.26
0.45 0.91
1.40 2.22 2.89
3.32
In an effort to achieve greater returns for short-term securities, I have been in contact with two of the local
banks (Prior Lake State Bank and New Market Bank) Both banks are offering higher rates to the City on their
short-term certificates of deposit. Deposits up to $250,000 in these banks would be insured by the Federal
Deposit Insurance Corporation (FDIC). Additional collateralization must be approved by the Board of
Directors for each of these banks and secured in the City's name prior to investing beyond this amount. It is
anticipated that Prior Lake State Bank will review and approve the City's request for additional collateralization
at their next board meeting in July. New Market Bank currently does not have the appropriate securities to
pledge as additional collateralization at this time.
During the second quarter of 2009, there was some fluctuation primarily in the longer-term rates. The
following table illustrates the changes that have occurred in the treasury rates during the past eighteen months:
4M Fund
(4MP) 1 mo 3mo 6mo 1 yr 2 yr 3 yr 5yr 7 yr 10 yr
Change from 3 mas
~o (0.23) (0.02) (0.08) (0.01 ) 0.30 0.49 0.87 0.91 0.82
Change from 6 mas
ago (0.43) 0.06 0.08 0.08 0.19 0.35 0.64 0.99 1.32 1.28
Change from 1 yr
ago (2.11 ) (1 .43) (1.71) (1.82) (1.80) (1.52) (1.27) (0.80) (0.42) (0.46)
Change from
12/31/07 (4.39) . (2.59) . (3.17) . (3.14) . (2.78) . (1.94) . ( 1.43) (0.91 ) (0.51) I (0.51)
Bonds continue to be called. During the second quarter of 2009, an additional $4.8M in bonds was called.
Since December, 2008, approximately $13 million in bonds, or 60% ofthe 12/31/08 portfolio, have been called.
In addition, another $lM has been called in July.
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Reports\O( 20 09\200f.l 2nd Ouarter Investment
Investments for local governments are restricted to only those permitted by Minnesota Statutes. They are
identified as follows:
1. U.S. Treasury Bills and Notes which are direct obligations of the federal government.
2. U.S. Government Securities which are guaranteed or insured by the federal
government i.e., FHLB, FNMA, FHLMC agencies or authorities such as TV A.
3. State and Local Government bonds that are rated "A" or better.
4. Bankers' Acceptances ofa United States Bank.
5. Commercial Paper that is rated "A1+Pl" and matures in 270 days or less.
6. Repurchase Agreements/Certificate of Deposits with banks having capitalization
exceeding $10,000,000.
Also allowable, but of higher risks, are guaranteed investment contracts (GIC's) and mortgage-backed securities
(CMO's) which because of their sophisticated nature and inherent risk, Prior Lake does not participate in.
The City's investment portfolio amount is a pool of funds identified on the monthly Treasurer's Report.
Because City funds are pooled for investment purposes, interest is allocated to each fund on a monthly basis,
and is based upon each individual fund's proportionate share of the total amount. Overall, the total investment
pool does not represent excess reserves but rather available financial resources. In most instances these funds
were established and restricted for specific and designated purposes by either Minnesota Statutes or City Code
to accomplish the goals and objectives of the City of Prior Lake.
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2nd Ouarter Investment
City of Prior Lake
Investment Summary
As of 06/30/2009
Interest Purchase Maturity
Broker Investment Cost Rate Date Date
League 4M Fund:
Liquid Asset Fund 6,760,809.32 0.320%
Northland Securities:
Waite Park G.O. bonds 183,051.00 5.600% 12/21/01 12/01/10
FNMA gOY!. agency 199,700.00 3.000% 02/26/09 02/26/11
FHLMC gOY!. agency 299,550.00 3.000% 03/12/09 03/12/11
Waite Park G.O. bonds 170,721.00 5.750% 12/21/01 12/01/11
FNMA gOY!. agency 800,000.00 3.000% OS/21/09 OS/21/12
Waite Park G.O. bonds 159,606.00 5.850% 12/21/01 12/01/12
FNMA gOY!. agency 497,500.00 3.450% 05/13/09 04/08/16
S!. Francis MN ISO OPEB 500,000.00 4.400% 4/16/09 04/01/17
Aurora MN ISO OPEB 500,000.00 4.650% 02/12/09 02/01/18
Stillwater MN ISO OPEB 500,000.00 4.750% 02/17/09 03/01/18
FHLMC gOY!. agency 500,000.00 4.000% 03/27/08 03/15/18
FHLMC govt agency 500,000.00 4.000% 4/10/08 04/15/18
Robbinsdale OPEB 1,000,000.00 4.600% 05/14/09 02/01/19
Subtotal 5,810,128.00
Smith Barney:
Citibank NA NV CD 145,000.00 1.750% 01/07/09 10/07/09
RBS Citizens NA RI CD 245,000.00 1.200% 02/18/09 11/18/09
Bank of America NA NC CD 245,000.00 1.200% 02/19/09 11/19/09
FICO zero gOY!. agency 389,600.00 3.750% 03/21/03 12/06/09
Citibank NA NV CD 96,000.00 2.300% 01/07/09 01/07/10
FNMA gOY!. agency 250,000.00 2.800% 03/25/09 03/25/10
Bank Vizcaya CD 96,000.00 1.300% 03/25/09 03/26/10
New South Federal Savings AL CD 96,000.00 2.350% 01/07/09 07/07/10
First Federal Bk of CA CD 96,000.00 2.750% 01/07/09 07/07/10
Western bank PR CD 96,000.00 2.500% 01/09/09 07/09/10
GMAC Bank UT CD 96,000.00 2.750% 01/02/09 01/03/11
Bank Santander PR CD 96,000.00 2.550% 01/23/09 01/24/11
Flagstar Bank FSB MI CD 96,000.00 2.650% 01/23/09 01/24/11
Shorebank IL CD 96.000.00 2.700% 01/28/09 01/28/11
First Regional Bank CA CD 96.000.00 2.350% 01/28/09 01/28/11
FICO zero gOY!. agency 673.760.00 4.790% 12/05/02 04/06/11
Keybank Natl Assn OH CD 96.000.00 2.600% 03/25/09 09/26/11
Doral Bank PR CD 96.000.00 2.750% 03/30/09 09/30/11
FHLB gOY!. agency 1,000,000.00 4.875% 12/20/02 11/15/11
Goldman Sachs Bank CD 96,000.00 2.850% 01/21/09 01/23/12
GE Capital Financial UT CD 96,000.00 3.000% 01/23/09 01/23/12
Sallie Mae Bank CD 96,000.00 3.050% OS/20/09 OS/21/12
FNMA gOY!. agency 500,000.00 3.000% OS/21/09 OS/21/12
BMW Bk of North America UT CD 96,000.00 3.600% 12/31/08 12/31/12
CIT Bank UT CD 96,000.00 3.150% 01/22/09 01/22/13
Capital One CD 96,000.00 4.400% 01/23/08 01/23/12
Capital One CD 96.000.00 4.400% 01/23/08 01/23/12
Washington Mutual CD 96.000.00 4.400% 01/23/08 01/23/12
Capmark Bank UT CD 96.000.00 3.000% 02/18/09 02/21/12
American Express Bank FSB CD 96,000.00 4.750% 12/24/08 12/24/13
American Express Centurion Bk CD 96,000.00 4.750% 12/24/08 12/24/13
Morgan Stanley Bk-UT CD 96,000.00 4.250% 12/24/08 12/26/13
GE Money Bank UT CD 96,000.00 4.100% 12/30/08 12/30/13
FHLMC gOY!. agency 550,000.00 4.000% 06/18/09 12/15/15
FHLB gOY!. agency 500,000.00 4.200% 02/25/09 02/25/16
FNMA gOY!. agency 1.000,000.00 4.500% 02/06/08 02/06/17
FHLB gOY!. agency 1,000,000.00 4.875% 02/13/08 02/13/18
FHLB gOY!. agency 500,000.00 4.650% 02/27/09 02/27/19
Money Market 15.323.82 0.170%
Subtotal 9,413.683.82
Wachovia Securities:
FNMA gOY!. agency step-up 1,000,000.00 1.750% 01/13/09 07/13/09
FHLMC gOY!. agency 1,000,000.00 2.250% 02/19/09 02/19/10
FHLMC gOY!. agency 499,625.00 2.125% 04/30/09 04/30/10
FNMA gOY!. agency step-up 415,000.00 2.000% 05/12/09 OS/21/10
Subtotal 2.914,625.00
Investment Portfolio Total $ 24,899,246.14 2.744% (weighted average)
2009 Investment Reports 11:03 AM07/1312009