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Home My WebLink About5C - 1st Quarter Investment Report o~ PRI01> t ~ ~ 4646 Dakota Street S,E. U ~'!:; Prior Lake, MN S5372-1714 ~INNESO~~ CITY COUNCIL AGENDA REPORT MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: ALTERNATIVES RECOMMENDED MOTION: Reviewed by: (,J MAY 3,2010 5C JERIL YN ERICKSON, FINANCE DIRECTOR CONSIDER APPROVAL OF 2010 1st 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 March 31, 2010, The Investment Report Summary Narrative provides some supplementary information with respect to the investments currently held and the allowable forms of investments permitted by Minnesota Statute, 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 2010 1 st 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 2010 1 st Quarter Investment Report as submitted. L 1. 2010 1 st Quarter Investment Report Summary 2. Investment Report Summary Narrative www.cityofpriorlake.com Phone 952.447.9800 / Fax 952.447.4245 INVESTMENT REPORT SUMMARY NARRATIVE The attached Investment Report Summary identifies the various types of investments and the brokers/banks the City of Prior Lake uses for investment purposes. As of March 31, 2010, the balance of the investment portfolio is $20,736,392.60. This is a decrease of $2.03 million from December 31, 2009. In addition to ongoing operational expenditures, payments were made for the CR21 watermain repair and CR21 extension projects and tax increment revenue note obligations. The weighted average return of the investment portfolio is currently 3.528% which is up from 3.009% at the end of 2009. The weighted average return fluctuates primarily due to the balance that is in the 4M money market account. When securities are called, there may not be an immediate investment option available so the funds are invested short-term until a future settlement. It continues to be challenging 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 few months. Current short-term rates being offered by financial institutions continue to be very low. The following table shows the current money market rate for the 4M Fund and treasury rates: 4M Fund (4MP) 1 mo 3mo 6mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr Current Rates (04/23/10) 0.18 0.14 0.16 0.26 0.46 1.10 1.68 2.61 3.30 3.84 During the first quarter of 2010, the short-term rates continually crept downward or remained relatively flat. The longer-term rates crept slightly downward, also. The following table illustrates the chan!!es that have occurred in the treasury rates and the 4M Fund account during the past fifteen months: 4M Fund (4MP) 1 mo 3mo 6mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr Change from 3 mos ago (0.06) 0.11 0.10 0.04 (0.06) (0.12) (0.10) (0.14) (0.11 ) (0.01) Change from 6 mos ago (0.13) 0.09 0.02 0.06 0.01 0.07 0.15 0.24 0.35 0.53 I Change from 1 yr ago (0.36) (0.02) (0.05) (0.19) (0.16) 0.21 0.45 0.88 1.00 1.13 I Change from 12/31/08 (0.56) 0.04 0.05 (0.03) 0.04 0.26 0.60 1.00 1.41 1.59 I Bonds continue to be called. During the first quarter of 20 I 0, approximately $2.5M in bonds was called. Bond issuers are taking advantage of calling their bonds early and issuing refunding bonds at lower interest rates. In addition, $192k in certificates of deposit was called due to bank failures. All of the city's investments in certificates of deposit are insured by the Federal Deposit Insurance Corporation. FDIC insurance covers depositors' accounts at each insured bank including principal and any accrued interest through the date of the insured bank's closing up to the insurance limit. The current insurance limit is $250,000 through December 31, 2013. Investments for local governments are restricted to only those permitted by Minnesota Statutes. They are identified as follows: I. U.S. Treasury Bills and Notes which are direct obligations ofthe federal government. 2. U.S. Government Securities which are guaranteed or insured by the federal government i.e., FHLB, FNMA, FHLMC agencies. 3. State and Local Government bonds that are rated "A" or better. 4. Bankers' Acceptances of a United States Bank. 5. Commercial Paper that is rated "A 1 +Pl" and matures in 270 days or less. 6. Repurchase Agreements with banks having capitalization exceeding $10,000,000. 7. Time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of United States banks. Also allowable, but of higher risk, 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 following chart shows the amount and percentage invested in each investment type. Currently, Federal Home Loan Mortgage Corporation (FHLMC) comprises thirty (30) percent of the portfolio ($6.25 million) followed by Certificates of Deposit (18%, $3.7M), Federal National Mortgage Association (17%, $3.6M), OPEB Bonds (12%, $2.5M) and Federal Home Loan Bank (11 %, $2.25M). Investment by Type FHLB 11% Certificates of Deposit 18% FNMA 17% FHLMC 30% 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 n~sources. 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. City of Prior Lake Investment Summary As of 03/31/2010 Interest Purchase Maturity Broker Investment Cost Rate Date Date League 4M Fund: Liquid Asset Fund 1,223,674.75 0.200% Northland Securities: Waite Park G.O. bonds 183,051.00 5.600% 12/21/01 12/01/10 FNMA govt agency 199,700.00 3.000% 02/26/09 02/26/11 FHLMC govt agency 299,550.00 3.000% 03/12/09 03/12/11 FNMA govt agency 500,000.00 4.000% 07/08/09 07/08/11 Waite Park G.O. bonds 170,721.00 5.750% 12/21/01 12/01/11 Waite Park G.O. bonds 159,606.00 5.850% 12/21/01 12/01/12 FNMA govt agency 500,000.00 4.000% 02/24/10 02/25/15 FNMA govt agency 497,500.00 3.450% 05/13/09 04/08/16 St Francis MN ISD OPEB 500,000.00 4.400% 4/16/09 04/01/17 Aurora MN ISD OPEB 500,000.00 4.650% 02/12/09 02/01/18 Stillwater MN ISD OPEB 500,000.00 4.750% 02/17/09 03/01/18 FHLMC govt agency 500,000.00 4.100% 12/24/09 12/24/18 FHLMC govt agency 2,000,000.00 4.000% 12/24/09 12/24/18 Robbinsdale OPEB 1,000,000.00 4.600% 05/14/09 02/01/19 FHLMC govt agency 800,000.00 4.125% 2/26/10 02/26/19 Subtotal 8,310,128.00 Prior Lake State Bank: Certificate of Deposit 245,610.82 0.750% 1 0/07/09 04/07/10 Morgan Stanley Smith Barney: Westernbank 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 FICO zero govt 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 96.00000 2.750% 03/30/09 09/30/11 FHLB govt 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 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 United Community Bank GA CD 240,000.00 2.200% 10/07/09 04/09/12 First Bank of PR CD 240,000.00 2.300% 10/09/09 04/09/12 Sallie Mae Bank CD 96,000.00 3.050% OS/20/09 OS/21/12 FNMA govt agency 500,000.00 3.000% OS/21/09 OS/21/12 FNMA govt agency 750.000.00 3.000% 10/29/09 10/29/12 GE Money Bank UT CD 149,000.00 2.400% 11/20/09 11/20/12 Flagstar Bank FSB MI CD 150,000.00 2.500% 11/27/09 11/27/12 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 American Express Bank FSB CD 149,000.00 2.800% 11/25/09 11/25/13 American Express Centurion Bk CD 149,000.00 2.800% 11/25/09 11/25/13 Discover Bank DE CD 240,000.00 2.650% 12/09/09 12/09/13 BMW Bk of North America UT CD 150,000.00 2.700% 12/11/09 12/11/13 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 Citibank NA NV CD 96,000.00 3.000% 12/09/09 12/09/14 FHLMC govt agency 550,000.00 4.000% 06/18/09 12/15/15 FNMA govt agency 650,000.00 3.000% 03/30/10 12/30/15 FHLMC govt agency 500,000.00 3.000% 12/29/09 12/29/17 FHLMC govt agency 500,000.00 4.100% 12/24/09 12/24/18 FHLMC govt agency 600,000.00 4.000% 03/24/10 09/24/18 FHLB govt agency 500,000.00 3.000% 12/30/09 12/30/19 Money Market 217.09 0.200% Subtotal 9,706,977.09 Wells Fargo Advisors: FHLB govt agency 750,000.00 3.000% 03/18/10 03/18/13 FHLMC govt agency 500,000.00 3.000% 02/24/10 02/24/17 Money Market 1.94 0.200% Subtotal 1,250,001.94 Investment Portfolio Total $ 20,736,392.60 3.528% (weighted average)