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V � 4646 Dakota Street SE
Prior Lake. MN 55372
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CITY COUNCIL AGENDA REPORT
MEETING DATE: AUGUST 12, 2013
AGENDA #: 5C
PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR
PRESENTED BY: JERILYN ERICKSON
AGENDA ITEM: CONSIDER APPROVAL OF 2"d QUARTER 2013 INVESTMENT REPORT
DISCUSSION: I ntroduction
The purpose of this agenda item is for the Council to consider approval of the in-
vestment report for the first quarter.
Current Circumstances
Staff has prepared a list of investments as of June 30, 2013. The Investment Re-
port Summary Narrative provides some supplementary information with respect to
the investments currently held and the allowable forms of investments permitted
by Minnesota Statute.
Staff implemented new investment software during 2012. Prior to this implementa-
tion, all of the investments were tracked on an Excel spreadsheet which had its
limitations for extracting various data. The software provides the ability to gener-
ate reports and charts by broker, security type, maturities, etc. The software also
enables staff to track interest earned on an accrual basis versus a cash basis as
well as changes in market value.
If Council members have questions please feel free to contact me at 952-447-
9841 for more information.
Conclusion
The City Council should approve the quarterly investment report.
ALTERNATIVES: 1. A motion as part of the consent agenda to approve the 2013 2"d Quarter In-
vestment Report as submitted.
2. Take no action and provide the staff with specific direction.
RECOMMENDED Alternative 1.
MOTION:
INVESTMENT REPORT SUMMARY NARRATIVE
The attached "Investment Portfolio - Detail, by Broker" identifies the various types of investments and
the brokers/banks the City of Prior Lake uses for investment purposes.
As of March 31, 2013, the balance of the investment portfolio is $26,399,794. This is an increase of
$2.6M from March 31, 2013 primarily due to the receipt of $5.3M for the first half tax settlement. The
tax settlement is comprised of current and delinquent property taxes, special assessments and tax
increment revenues.
The `weighted average yield to maturity at cost' of the investment portfolio is currently 1.88% which is
slightly down from 2.10% as of March 31. The yield will fluctuate due in part 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 $5.9M.
It continues to be challenging to find competitive rates for short-term investments---30 to 120-day ma-
turities. 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 insti-
tutions 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 3 mo 6 mo 1 r 2 r 3 r 5 r 7 r 10 r
Current Rates ' '
08/05/13 .05 0.03 0.05 0.08 0.12 0.32 0.61 1.39 2.04 2.67
During the second quarter of 2013, the short-term rates have slightly declined. Mid-term rates (one- to
three-year maturities) have increased from 1 to 30 basis points and longer term rates (five- to ten-year
maturities) have increased from 64 to 72 basis points. The following table illustrates the chanQes 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 r 2 r 3 r 5 r 7 r 10 r
Change from
3 mos a o - 0.02 0.03 0.01 0.01 0.11 0.30 0.64 0.72 0.65
Change from
6 mos a o - - 0.01 0.01 0.01 0.11 0.30 0.69 0.78 0.74
Change from
1 r a o - 0.02 0.05 0.06 0.06 0.03 0.25 0.69 0.85 0.85
Change from
2 rs a o - 0.01 0.01 - 0.04 0.09 0.15 0.35 0.54 0.66
As rates have started to increase, the market value of the existing securities will decline. As of Decem-
ber 31, 2012, market value exceeded the cost of the investments by $457k. As of June 30, 2013, the
market value of the portfolio is less than the cost of the investments by $169k. The change in the fair
value of the securities is adjusted against interest earnings.
I
Investments for local governments are restricted to only those permitted by Minnesota Statutes. They
are identified as follows:
i
1. U.S. Treasury Bills and Notes which are direct obligations of the federal gov-
ernment.
2. U.S. Government Securities which are guaranteed or insured by the federal
government i.e., FHLB, FNMA, FHLMC agencies. I
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+P1" 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 Corpora-
tion 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.
In addition to the "Investment Portfolio — Detail, by Broker" report, charts and tables showing the diver-
sification by Broker and Security Type have been included for your reference.
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.
CITY OF PRIOR LAKE, MINNESOTA a� �
Investment Portfolio - Detail, by Broker ���
lune 30, 2013
M.v��ao«
qNpesc iirchase Maturity
�� y�qN Cm Rata QHe Date
LeaNe of Mhx�esota Ckies
Uquid Asset F+nd 5.920.308 QOS%
Morean Sta�leY • Smith BamtY
lu Fedenl Bank - N�rison All LOS 8/20(2018 215,000 L45% 02/14j2Q13 �1/10/2016
A!y BaM • UT 1.45 4117(2013 154�D LK% 09/17(2010 09(17/]013
AltyBmk-Ut1.758J21/2016 94,000 L75% Oq/2</2011 OH/31/2016
a�rwn aweu eank. Fse x.s ii/zsR�; i+s.coo zmx i�hs/mo9 uRs/zm3
�.ic,� e�r� e�. Fse 4n i�lz+l�� ss.000 oasx WzVzooa iz/:�/zoia
Mierican Exp�ess Cmturian Bank L811/73/Ml3 ia.000 z.sox iU�sJ�aas i�sRoia
American ErMesCenlutbn Br�kl.7512/2�/Ni13 %U00 �.75% 12(11/200b 11/1�/2U73
6an�v Papu�ar of Puerto Rico L28/dSjM14 x�s.aoo i.mx ae/xa/xOii oel�slml�
Bank of Bsroda - NY0511(!9/2fl13 IK,OOU O.SOK 11/7CJ1G17 1I/29(2013
y„tdq;,,,as7�,/m� z�s,aro o.sox o:/�oe/xou o�/as/xo13
Ank of pldia • NY O51f/20(l013 2K.00D OSO% 17/21/2012 il/20('l013
BardaysBank xas.aoo i.smc o�./is/mu ouLn/zov
wnwe,�w�a�+�,-urzrvlli/zw �s4000 Lwx i2/t�zms u0vlzma
area�t-url.�safia/ioss 3s4� Lux us/iV�1 ael�a/ZO15
MlankAC1.83/13/207613 9b.U7D LBP.i 03/13(ZU13 03/1312020
OT 9ank NA -!N 3 32(9/201/ 96.dOD 3-W% 11�4h� 17/M/2011
D'ecrnerBank-DEL6511/9/]013 2M.000 2.�1G 1]/09/ZOD9 17/09/]013
oo.,�e«acais�lst�i� z�s.000 arsz m�yxai o�/�Rai�
c.mw�,ki,d��RasiUzs/io� zes.000 ososc iitxsftm2 Wnno�
rmn �s i:/�sl�on-� i.mn.aoo i.sox i�/iatmiz iuxsltax2
c�nauwi�/sttou-� ��om ss� iUa�7�m2 i�/mu
nx.es�wzR�/��-� �50.aoo Zaox oz/z�tmu o�ln/zoxa
pne stw 3/x�noxs-is i.axu o0o zmfc o3/t�/me3 o�/nnoxs
�+uau.psnenaz:as �so.ao �.omc as/w:ou osns/m::
i1RS7B�WKCpyWi1AKEPR1.151Of26/2016 245,000 LSS% ]0(26�01] SO/24f2016
�cnre�uurtEraiLS�/i3/�mT �;mo iemc o�pa(mu o�lt�Rm�
GE ON�+I FMtnuai Mc UT 1.35 4/IGP�1� ssu,o� �sx ow�.no�, an.no�,
r,cM�.vea�a ss.oao asa.c W�/=� i�V�ois
Wldmai Sachs Wt U511- NV L6 7/7$/2017 %000 L65% OI/29iS012 02(ZD(I011
GoMmanSacMBa�dcUSl-NYL85$/2VZ016 150.� LBS% 00/N12011 O8J'tYM16
Morsan5tmleVBank-Uf11537(I6R�13 %.000 �.75% W26{2406 W�6/I013
Wm{an Ra�daY �� 26/.502
s�u�r.aEerzco�a.r+vuruiWiV�� za.00u �.wc iWzVmu iW:U�m�
so�.�o e.* o.� �n/mi. :a.aao aasx o:/as/mu o:/mtzm.
s�ace na�x �r w�. is nlze/zoi� za.00u ismc o3tiNpu o�/ZV�o�a
xo�m�ea�-n�esc�r�,rtvszfv/xoxais z$.aoo L�sx oLZr/� oz/��/mxu
woaaFa�.�+M�no�.esJ;V�� iao.aoo Leox as/ii/mi: os/3i/mi�
s�eow: s,us.suz
New MxkN Rrte Bmt
ca„w,,,d�o xsa.i� i.asx os�s/�io oaM'Roi3
Northimd secufrt+es
AuroratSD-MN4.657/1/20L-17 SOQ000 4.gS% �7(12/l009 02/01/2016
Cssh - tlutMand Securilias Cnh �3.573
rNin z.os u/s/ia¢i-u sa.aao i.amc oalai/xoix uM9/mn
��. Zv 3v�+no�:-� �.s.000 L�� �:na2ot: 17J19(2072
�:�v�ono��. ,.� :.aou osnavm�: w�n�a
FFUn�cxu/ie/xa:au s�s.000 i.00x osryshoix iz/�U�om
��zss/nnm�-� so4000 :sox a3n�/mi3 o3/'t�/mia
M66emdaMlSD-MNtb2/1/I019 1.004� 4.60% �11V� �D1R019
SahMkmcisl�-MNiA4/1/2017 SOO,OAO �.M% U4/1611W9 O/N1/2017
StdlwatalSD-MN{.753/SJ207&16 SOO.WO 4.75% 07J37/2009 03/Ol/2018
w,�co� ca.�q r�ous� s.zs �l�/xo2o-io us,000 �.xx m/mJ�oia o�oi/zoxo
SJNOtaI 6A81.S23
Weps Fa�o Mviwrs
FHIB 5tM 12/IS1�Q22'13 L999.500 L00% 17/18/2012 17/28/1021
FtRB Rp 7J2]/IO13-13 1,249,375 L75% U2/S7/2011 03{IZl1023
FlilhKil2/3W102a13 Ll��,�n z.aoz oyi4nolz 1LiN�oto
Watls iu{o Adv[sors Ush 215�
ybtoni 4417,500
Yrvertma9 Patfa6o Total 26.399.74�
C�y of Rrior taks -Q�nrtvly Invasu�wnt Report
04/QS/2013-O6f3d/2013
CITY OF PRIOR LAI<E, MINNESOTA "�`��'`�'��`� .
investment Port�olio - Di�rersification, by Bralcer (Portfolio) � �
June 30, 2013
'
P�srtfolio H+ste3an�s Distribtatior� by Portfolio fdame
_ _
Na'thtand Securities. .._. __
2d.5b � --. _ _ ... . _ _ _ _ _ ._
—,
K�w Market Bank„__ _
. __ __.. . ,,
E�.9G � f .: .\
� \ __ _
�t���'^,,ti' ,: � `� _ __ . _ �. Wetds Facga kch�isc�rs
�,� 16.73 Sb
Mor�xn Stantey - Smith Barney _ �
35.32% - __ . _
� ____.__Lengue � Minnesota CitiQs
--� _ 2242 55
yTN1 Ll« Days to % of
Description Cost Cost Value Maturity Portfolio
League of Minnesota Cities D.050 5,920,1d8 1 22.42%
Morgan Stanley - Smith Barney 1.825 9,324,502 1,744 35.329�
New tVlarket Bank 1.850 254,162 71 0.96%
Northiand Securities 3.130 6,483,523 2,451 24.56%
Wells Fargo Advisors 2.598 4,417,500 3,275 ifi.73%
Total / Average 1.877 2&,399,794 1,767 1tl0.00%
City of Prior Lake - Quarter�y investment Report
4(dl/2�13-6/30/2013
''-� I' R I�
CITY OF PRIUR LAKE, MINNESOTA ���. �-� "�� ��
Investment Portfolio - Diversification, by Security Type ��` � x
June 30, 2013
�.,,,..,1•\.�i�G�t1' t .
°.».�,.,�.-......�`
Partfokio H€�(dings Distribution by S�curity Typ�
, .._ _
_ __. __
__�.__ M--, _._._, �.
, --
_
FFtPlA Bond - -.--."_ _ f . -�,, ,.� ,`' _ -- -_ tacal Governrr�er�t Envestnient Paoi
l.89 �° ',! \ �, • 22.42 S
, . �
s ,
� r � � _'._ >
- . -' Munic�sai Bond
FNLMC Bond- ` �--�....�_�, �� _ --- -- _ F0.40,�
l3.0$� _ _ _ _ N
``-,-� ,�" � .. _ �
�,� ° . _ _ _ _. _Cash
Eti�B Bond ��� "`-�=r-:.�"'� - -
24.�14s` ' -- - � t.25�
�,
Cornpound CO .... °�-' Certiticate Of Deposit
,� _ __ _-
Q.4� �o ' _ _ _ ._ _ _ _. ._ _ �= . r 20.97 �m
yTNi [at Days to % of
Description Cost Cost Value Maturity Portfolio
Cash 332,525 1 1.26 %
Certificate of Deposit 1.656 5,537,000 723 20.97%
Compound CD 1.850 254,162 71 0.96%
FHLB Bond 2.467 7,65&,875 3,454 29.01%
FHLMC Bond 2.011 3,452,125 2,719 13.08%
FNMA Bond 2.5Q0 500,000 3,557 1.89%
LGIP 0.050 5,920,1Q$ 1 22.42%
Municipal Bond 4.569 2,745,000 1,822 10.40%
Total / Average 1.877 26,399,794 1,767 1QQ.Od%
City of Prior Lake - Quarterly Investment Report
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