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Home My WebLink About5H 1st Quarter 2011 Investment ReportPRIq U 4646 Dakota Street SE 4tI-�so"?P Prior Lake, N1N 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 16, 2011 AGENDA #: 6H PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTER: JERILYN ERICKSON AGENDA ITEM: CONSIDER APPROVAL OF 1ST QUARTER 2011 INVESTMENT REPORT DISCUSSION: Introduction The purpose of this agenda item is for the council to consider approval of the investment report for the first quarter. Current Circumstances Staff has prepared a list of investments as of March 31, 2011. 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 2011 1st 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 2011 MOTION: 1st Quarter Investment Report as submitted. Reviewed by: Frank Boyles, City 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 March 31, 2011, the balance of the investment portfolio is $21,431,687.89. This is a decrease of $2.4 million from December 31, 2010 primarily for operational expenditures. The weighted average return of the investment portfolio is currently 2.815% which is up slightly from 2.709% as of December 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 March, there was $1.9M in money market funds compared to $3.OM at the end of December. 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 first quarter of 2011, the short -term rates have slightly declined or remained relatively flat. Longer term rates (two- to ten -year maturities) have increased 17 to 27 basis points since December. 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 05/10/11 0.05 0.02 0.03 0.07 0.19 0.59 1.03 1.91 2.57 3.23 During the first quarter of 2011, the short -term rates have slightly declined or remained relatively flat. Longer term rates (two- to ten -year maturities) have increased 17 to 27 basis points since December. 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. 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 "Al +P1" and matures in 270 days or less. Page 2 4M Fund 41IMIP Imo, 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr Change from 3 mos ago 0.01 0.02 0.03 0.02 0.01 0.19 0.27 0.23 0.19 0.17 Change from 6 mos ago 0.04 0.09 0.07 0.02 0.03 0.38 0.65 1 0.97 0.99 1 0.94 Change from 1 yr ago 0.15 0.10 0.07 0.07 0.11 0.22 0.31 0.31 0.38 0.37 Change from 2 rs ago 0.51 0.12 0.12 0.26 0.27 0.01 0.14 0.57 0.62 0.76 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. 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 "Al +P1" and matures in 270 days or less. Page 2 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 -eight percent (28 %) of the portfolio ($5.9 million) followed by Federal National Mortgage Association (20 %, $4.4M), Certificates of Deposit (17 %, $33M), OPEB Bonds (12 %, $2.5M), Money Market Funds (9 %, $1.9M), Federal Home Loan Bank (6 %, $1.4M), Financing Corporation Bonds (FICO, 3 %, $.7M), Federal Farm Credit (FFC, 2 %, $.5M), General Obligation Bonds (2 %, $.3M) and Economic Development Bonds (1 %, $.2M). Investment by Type Economic Dev FICO Bonds 3% FFC 1% FHLB 2% Certificates of 6% Deposit 17% Money Market Funds FNMA 9% 20% G.O. Bonds 2% OPEB Bonds 12% FHLMC 28% The City's investment portfolio amount is a pool of funds identified on the monthly Treasurer's Report. Because City funds are pooled for investment purposes, interest is allocated to each fund on a monthly basis, and is based upon each individual fund's proportionate share of the total amount. Overall, the total investment pool does not represent excess reserves but rather available financial resources. In most instances these funds were established and restricted for specific and designated purposes by either Minnesota Statutes or City Code to accomplish the goals and objectives of the City of Prior Lake. The constraints for each of the funds are noted on the Treasurer's Report, Page 3 pF P&!p$ City of Prior Lake Investment Summary As of 313112011 ° "Mivesot" Interest Purchase Maturity Broker Investment Cost Rate Date Date League 4M Fund: Liquid Asset Fund 1,308,226.69 0.050% 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 02/01119 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 2.200% 10/07109 04/09/12 Morgan Stanley Smith Barney 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% 10/07109 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 FNMA govt. agency 1,050,000.02 2.000% 09129/10 09/29/12 FNMA govt. agency 670,000.00 1.250% 10115/10 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% 11127/09 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 09/17113 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% 12/30108 12/30/13 State Bank of India CD 245,000.00 1.500% 03/15/11 02124/14 FNMA govt. agency 550,000.00 3.250% 06/30/10 06/30/14 FHLMC govt. agency 1,000,000.00 3.000% 06130/10 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 12,588.33 0.050% Subtotal 9, 554, 348.35 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 FNMA govt. agency step -up 499,500.00 2.000% 07/12/10 07/12/19 Money Market 600,000.85 0.050% Subtotal 3, 04 8, 7 85.8 5 Investment Portfolio Total $ 21,431,687.89 2.815% (weighted average) 2011 Investment Reports : 102011 Report