HomeMy WebLinkAbout5C 4th Quarter Investments Report4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE:
FEBRUARY 7, 2011
AGENDA #:
5C
PREPARED BY:
JERILYN ERICKSON, FINANCE DIRECTOR
PRESENTER:
JERILYN ERICKSON
AGENDA ITEM: CONSIDER APPROVAL OF 2010 4TH QUARTER INVESTMENT
REPORT
DISCUSSION: Introduction
The purpose of this agenda item is for the council to consider approval of
the investment report for the fourth quarter.
Current Circumstances
Staff has prepared a list of investments as of December 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.
ALTERNATIVES: 1. A motion as part of the consent agenda to approve the 2010 4th
Quarter Investment Report as submitted.
2. Take no action and provide the staff with specific direction.
RECOMMENDED Alternative 1. A motion as part of the consent agenda to approve the 2010
MOTION: It 4th Quarter Investment Report as submitted.
Jby
Frank B le , ity Manager
Page 1
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 December 31, 2010, the balance of the investment portfolio is $23,828,686.22. This is an increase of $1.01
million from September 31, 2010 primarily due to the receipt of the second half tax settlement. About $3.8M in bond
payments were made during fourth quarter in addition to ongoing operational expenditures.
The weighted average return of the investment portfolio is currently 2.709% which is down slightly from 2.864% as of
September 30. 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 December, there
was $3.OM in money market funds.
Bond issuers continued to take advantage of calling their bonds early and issuing refunding bonds at lower interest
rates, although less frequently. 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. During fourth quarter, two bonds totaling
$1.5M were called. These investments had been held for only six months.
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. 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:
During the fourth quarter of 2010, the short -term rates have slightly declined or remained relatively flat. Longer term
rates (two- to ten -year maturities) have increased 19 to 77 basis points since September. The following table
illustrates the changes that have occurred in the treasury rates and the 4M Fund account during the past twenty -four
months:
4M
Fund
4MP
1 mo
3 mo
6 mo
1 yr
2 yr
3 yr
5 yr
7 yr
10 yr
Current Rates
01/27/2011
0.05
0.13
0.15
0.17
.25
0.59
1.00
1.98
2.75
3.42
During the fourth quarter of 2010, the short -term rates have slightly declined or remained relatively flat. Longer term
rates (two- to ten -year maturities) have increased 19 to 77 basis points since September. The following table
illustrates the changes that have occurred in the treasury rates and the 4M Fund account during the past twenty -four
months:
Investments for local governments are restricted to only those permitted by Minnesota Statutes. They are identified
as follows:
U.S. Treasury Bills and Notes which are direct obligations of the federal government.
U.S. Government Securities which are guaranteed or insured by the federal government i.e.,
FHLB, FNMA, FHLMC agencies.
Page 2
4M
Fund
4MP
1 mo
3 mo
6 mo
1 yr
2 yr
3 yr
5 yr
7 yr
10 yr
Change from 3
mos ago
(0.03)
0.04
-
0.02
0.19
0.38
0.74
0.80
0.77
Change from 6
mos ago
0.14
0.10
0.06
0.03
0.03
-
0.02
0.22
0.29
0.33
Change from 1 yr
ago
0.20
0.03
0.06
0.01
0.18
0.53
0.68
0.68
0.68
0.55
Change from
12/31/08
0.70
0.04
0.01
0.08
0.08
0.15
0.02
0.46
0.84
1.05
Investments for local governments are restricted to only those permitted by Minnesota Statutes. They are identified
as follows:
U.S. Treasury Bills and Notes which are direct obligations of the federal government.
U.S. Government Securities which are guaranteed or insured by the federal government i.e.,
FHLB, FNMA, FHLMC agencies.
Page 2
State and Local Government bonds that are rated "A" or better.
Bankers' Acceptances of a United States Bank.
Commercial Paper that is rated "Al +P1" and matures in 270 days or less.
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 thirty percent (30 %) of the portfolio ($7.1
million) followed by Federal National Mortgage Association (18 %, $4.4M), Certificates of Deposit (15 %, $3.7M),
Money Market Funds (13 %, $10M), OPEB Bonds (11 %, $2.5M), Federal Home Loan Bank (6 %, $1.4M), Financing
Corporation Bonds (FICO, 3 %, $.7M), Federal Farm Credit (FFC, 2 %, $.5M), General Obligation Bonds (1 %, $.3M)
and Economic Development Bonds (1 %, $.2M).
Investment by Type
Economic Dev
FICO
Bonds
3%
1%
FFC
FHLB 2%
6%
Certificates of
Deposit
15%
FNMA
18%
Money Market Funds
13%
"
G.O. Bonds
1%
FHLMC
OPEB Bonds
30%
11%
The City's investment portfolio amount is a pool of funds identified on the monthly Treasurer's Report. Because City
funds are pooled for investment purposes, interest is allocated to each fund on a monthly basis, and is based upon
each individual fund's proportionate share of the total amount. Overall, the total investment pool does not represent
excess reserves but rather available financial resources. In most instances these funds were established and
restricted for specific and designated purposes by either Minnesota Statutes or City Code to accomplish the goals
and objectives of the City of Prior Lake.
Page 3
P$!pQ
04
City of Prior Lake
u Investment Summary
As of 12/3112010
+
Interest
Purchase
Maturity
Broker Investment
Cost
Rate
Date
Date
League 4M Fund:
Liquid Asset Fund
2,987,959.63
0.060%
New Market State Bank
Certificate of Deposit
245,000.00
1.800%
9/9/10
9/9/13
Northland Securities:
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
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
Robbinsdale OPEB
1,000,000.00
4.600%
05/14/09
02/01/19
Washington County MN Redev Auth
245,000.00
4.250%
07/01/10
01/01/20
FFC govt. agency
500,000.00
3.000%
09/08/10
06/08/20
FHLMC govt. agency
1,700,000.00
3.125%
07/27/10
07/27/20
Subtotal
7, 275, 327.00
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
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%
05/20/09
05/21/12
F N MA govt. agency
1,050,000.02
2.000%
09/29/10
09/29/12
FNMA govt. agency
670,000.00
1.250%
10/15/10
10/15/12
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
FHLMC govt. agency
700,000.00
1.875%
12/23/10
12/23/12
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
Ally Bank (formerly GMAC Bk) CD
150,000.00
1.450%
09/17/10
09/17/13
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
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
500,000.00
2.000%
07/28/10
10/28/16
Money Market
38,417.07
0.050%
Subtotal
9,623,177.09
Wells Fargo Advisors:
FHLB govt. agency
350,000.00
0.500%
12/14/10
06/14/11
FNMA govt. agency step -up
1,099,285.00
2.150%
12/30/10
06/30/13
FHLMC govt. agency step -up
500,000.00
2.000%
09/07/10
09/07/13
FHLMC govt. agency step -up
1,248,437.50
3.000%
06/28110
12/28/13
FNMA govt. agency step -up
499,500.00
2.000%
07/12/10
07/12/19
Subtotal
3, 6 97 , 222.50
Investment Portfolio Total $ 23,828,686.22 2.709 %, (weighted average)
2010 Investment Reports : 4Q2010 Report Page 1 of 1
1:29 PM2/211011