Loading...
HomeMy WebLinkAbout5B - 2nd Quarter Investment Report MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: ALTERNATIVES RECOMMENDED MOTION: Reviewed by: A TT ACHMEN : AUGUST 2, 2010 58 JERIL YN ERICKSON, FINANCE DIRECTOR CONSIDER APPROVAL OF 2010 2nd QUARTER INVESTMENT REPORT Introduction The purpose of this agenda item is for the council to consider approval of the investment report for the second quarter. Current Circumstances Staff has prepared a list of investments as of June 30, 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 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 2010 2nd Quarter Investment Report as submitted. nager 1. 2010 2nd Quarter Investment Report 2. Investment Report Summary Narrative www.cityofpriorlake.com Phone 952.447.9800 / Fax 952.447.4245 City of Prior Lake Investment Summary As of 06/30/2010 Interest Purchase Maturity Broker Investment Cost Rate Date Date League 4M Fund: Liquid Asset Fund 4,195,303.47 0.200% Northland Securities: Waite Park G.O. bonds 183,051.00 5.600% 12/21/01 12/01/10 FHLMC govt. 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 Waite Park G.O. bonds 159,606.00 5.850% 12/21/01 12/01/12 FHLMC govt. agency 2,000,000.00 3.000% 06/30/10 12/31/12 FNMA govt. agency 800,000.00 3.000% OS/26/10 11/27/13 FNMA govt. agency 500,000.00 4.000% 02/24/10 02/25/15 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 4.000% 04/22/10 10/22/18 FHLMC govt. agency 500,000.00 4.000% 04/22/10 10/22/18 Robbinsdale OPEB 1,000,000.00 4.600% 05/14/09 02/01/19 Money Market 700,000.00 0.200% Subtotal 8,312,928.00 Morgan Stanley Smith Barney: 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 96,000.00 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 FNMA govt. agency 650,000.00 3.000% OS/26/10 11/27/13 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 FNMA govt. agency 550,000.00 3.250% 06/30/10 06/30/14 FHLMC govt. agency 1,000,000.00 3.000% 06/30/10 06/30/14 Citibank NA NV CD 96,000.00 3.000% 12/09/09 12/09/14 FNMA govt. agency 650,000.00 3.000% 03/30/10 12/30/15 FHLMC govt. agency 600,000.00 4.000% 03/24/10 09/24/18 Money Market 550,174.97 0.200% Subtotal 10,310,934.97 Wells Fargo (formerly Wachovia Securities): FHLMC govt. agency step-up 1,248,437.50 3.000% 06/28/10 12/28/13 FHLMC govt. agency 500,000.00 3.000% 02/24/10 02/24/17 Subtotal 1,748,437.50 Investment Portfolio Total $ 24,567,603.94 2.821% (weighted average) 2010 Investment Reports 2Q2010 Report 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 June 30, 2010, the balance of the investment portfolio is $24,567,603.94. This is an increase of $3.8 million from March 31, 2010. Bond proceeds of $1.2M were received in May to finance a portion of the County Road 12 project. In June, $3.5M or 70% of the first half tax settlement was received which is comprised of current and delinquent property taxes, special assessments and tax increment revenues. The weighted average return of the investment portfolio is currently 2.821 % which is significantly lower than the average of 3.528% as of March 31. The weighted average return fluctuates primarily due to the balances that are in the short term money market accounts and the very low rate that is paid on money market funds. At the end of June the balance in the 4M money market was $4.2M and there was approximately $1.2M in money market funds at the brokerage firms. Contributing to the higher money market balance was $5.3M being called during the last two weeks of June. Bond issuers continue to take advantage of calling their bonds early and issuing refunding bonds at lower interest rates. When these 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 (07/23/10) 0.10 0.15 0.16 0.20 0.27 0.60 0.94 1.75 2.43 3.02 During the second quarter of 201 0, the short-term rates remained relatively flat. Longer term rates (two- to ten- year maturities) have declined 41 to 87 basis points since March. The following table illustrates the chan!.!es that have occurred in the treasury rates and the 4M Fund account during the past eighteen months: 4M Fund (4MP) 1 mo 3mo 6mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 vr Change from 3 mos aqo 0.02 0.02 (0.02) (0.09) (0.41 ) (0.60) (0.76) (0.86) (0.87) Change from 6 mos aqo (0.06) 0.13 0.12 0.02 (0.15) (0.53) (0.70) (0.90) (0.97) (0.88) Change from 1 yr aqo (0.13) (0.01) (0.13) (0.24) (0.50) (0.64) (0.75) (0.77) (0.56) Change from 12/31/08 (0.56) 0.06 0.07 (0.05) (0.05) (0.15) 0.24 0.55 0.72 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 of the 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 "A1+PI" 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 the City of Prior Lake has invested in each investment type. Currently, Federal Home Loan Mortgage Corporation (FHLMC) comprises twenty-seven (27) percent of the portfolio ($6.6 million) followed by Money Market Funds (22%, $5.4M), Federal National Mortgage Association (18%, $4.4M), Certificates of Deposit (14%, $3.4M), OPEB Bonds (10%, $2.5M), Federal Home Loan Bank (II %, $2.25M), Financing Corporation Bonds (FICO, 3%, $.7M), and General Obligation Bonds (2%, $.5M). Investment by Type FHLB 4% Certificates of Deposit 14% FNMA 18% Money Mar1<et Funds 22% FHLMC 27% .GO Bonds 2% 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.