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Home My WebLink About5C 2014 3rd Qtr Investment Report O � PRip� �� V � 4646 Dakota Street SE Prior Lake, MN 55372 '�jNivESO'� CITY COUNCIL AGENDA REPORT MEETING DATE: NOVEMBER 12, 2013 AGENDA #: 5C PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTED BY: JERILYN ERICKSON AGENDA ITEM: CONSIDER APPROVAL OF 3�d QUARTER 2013 INVESTMENT REPORT DISCUSSION: Introduction 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 September 30, 2013. 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. 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 3�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 September 30, 2013, the balance of the investment portfolio is $28,965,870. This is an increase of $2.6M from June 30, 2013 primarily due to the receipt of $3.2M in bond proceeds. The `weighted average yield to maturity at cosY of the investment portfolio is currently 1.74% which is slightly down from 1.88% as of June 30. 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 September the balance in the 4M money market was $8.6M due to anticipated contract payments for the three major construction projects currently underway. 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 10/17/13 .05 0.01 0.05 0.08 0.13 0.33 0.61 1.35 1.98 2.61 During the third quarter of 2013, the short-term rates have slightly declined. Mid-term rates (one- to three-year maturities) have also declined and longer term rates (five- to ten-year maturities) have ranged from a decrease of 2 basis points to an increase of 12 basis points. The following table illustrates the chanaes 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 - 0.01 0.02 0.06 0.05 0.03 0.03 0.02 0.06 0.12 Change from 6 mos a o - 0.01 0.05 0.07 0.04 0.08 0.27 0.62 0.78 0.77 Change from 1 r a o - 0.03 0.08 0.10 0.07 0.10 032 0.77 0.98 0.99 Change from 2 rs a o - 0.01 - 0.02 0.03 0.08 0.21 0.43 0.59 0.72 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 September 30, 2013, the market value of the portfolio is less than the cost of the investments by $408k. The change in the fair value of the securities is adjusted against interest earnings. Investments for local governments are restricted to only those permitted by Minnesota Statutes. They are identified as follows: 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. 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 o� p �"O� Investment Portfolio - Detail, by Broker F � � M September 30, 2013 ��NNeS�t* . � Interest Purchase Maturity Broker Investment Cost Rate Date Date League of Minnesota Cities LiquidAssetFund 8,559,170 0.05% Morgan Stanley - Smith Barney lst Federal Bank - Harrison AR 1.05 8/20/2018 245,000 1.05 02/19/2013 OS/20/2018 Ally Bank- UT 1.75 8/24/2016 96,000 1.75 OS/24/2011 OS/24/2016 ALLY BK, UT 1.15 9/19/2016 150,000 1.15 09/18/2013 09/19/2016 American Fxpress Bank, F58 2.8 11/25/2013 149,000 2.8 11/25/2009 11/25/2013 AmericanExpressBank,F584.7512/24/2013 96,000 4.75 12/24/2008 12/24/2013 � American Express Cen[urion Bank 2.811/25/2013 149,000 2.8 11/25/2009 11/25/2013 AmericanExpressCenturionBank4.7512/24/2013 96,000 4.75 12/24/2008 12/24/2013 8anco Popular of Puerto Rico 1.2 8/25/2014 245,000 1.2 OS/24/2011 08/25/2014 Bank of Baroda - NY 0.5 11/29/2013 245,000 0.5 11/30/2012 11/29/2013 Bankoflndia-NY0.511/20/2013 245,000 0.5 11/21/2012 11/20/2013 BarclaysBank-DE1.91/19/2017 245,000 1_9 Ol/19/2012 01/19/2017 BMW Bank of North America - UT 2.7 12/11/2013 150,000 2.7 12/11/2009 12/11/2013 CIT Bank- UT 1.45 8/24/2015 iso,000 i.as os/za/zoii os/za/zois CIT Bank SLC 1.8 3/13/2020-13 96,000 1.8 03/13/2013 03/13/2020 CITBank,NA-NV312/9/2014 96,000 3 12/09/2009 12/09/2014 Compass Bank, AL2 8/28/2018-14 245,000 2 O8/28/2013 OS/28/2015 DiscoverBank- DE 2.65 12/9/2013 240,000 2.65 12/09/2009 12/09/2013 DoralBank0.757/9/2014 245,000 0.75 07/09/2012 07/09/2014 EverbankJacksonville FL0.5 11/29/2013 245,000 0.5 11/29/2012 11/29/2013 FHLB 1.5 12/19/2022-13 1,000,000 1.5 12/19/2012 12/19/2022 FHLB Step 11/9/2022-13 300,000 2.199 11/09/2012 17/09/2022 FHLB Step 2/27/2023-13 450,000 2.543 02/27/2013 02/27/2023 FHLB Step 3/27/2023-13 1,420,000 2.566 03/27/2013 03/27/2023 FHLB Step 5/18/2022-13 350,000 2.586 OS/18/2012 OS/18/2022 FIRSTBANK CD SANTURCE PR 1.15 10/26/2016 245,000 1.15 10/26/2012 10/26/2016 GE CAP BK INC RETAIL 1.8 7/13/2017 96,000 1.8 07/13/2012 07/13/2017 GEGpitalFinanciallnc-UT1.356/24/2014 150,000 1.35 06/24/2011 06/24/2014 GE CAPITAL, UT 2.6 9/21/2020 150,000 2.6 09/20/2013 09/21/2020 GE Money Bank - UT 4.1 12/30/2013 96,000 4.1 12/30/2008 12/30/2013 Goldman Sachs Bank USA - NY 1.65 2/28/2017 96,000 1.65 02/29/2012 02/28/2017 Goldman Sachs Bank USA - NY 1.85 8/24/2016 150,000 1.85 OS/24/2011 OS/24/2016 Mercantil Commerce Bank, FL 1.9 8/29/2018 245,000 1.9 OS/29/2013 08/29/2018 Morgan5tanleyBank-UT4.2512/26/2013 96,000 4.25 12/26/2008 12/26/2013 Morgan Stanley Cash 17,221 SALLIE MAE BK CD Murray UT 1.5 10/24/2017 245,000 1.5 30/24/2012 SO/24/2017 SovereignBank0.857/7/2014 245,000 0.85 07/OS/2012 07/07/2014 State Bank of India 1.5 3/24/2014 245,000 1.5 03/24/2011 03/24/2014 Stockman Bank - Miles City MT 1.75 2/27/2020-14 245,000 1.75 02/27/2013 02/27/2020 WorldFinancialJumbo1.85/31/2017 200,000 1.8 OS/31/2012 OS/31/2017 Sub[otal 9,469,221 Northland Securities Aurora ISD - MN 4.65 2/1/2018-17 500,000 4.65 02/12/2009 02/Ol/2018 Cash - Northland Securities Cash 101,479 FHLB 2.09 11/9/2021-12 545,000 2.09 O8/09/2012 11/09/2021 FHLB 2.19 12/19/2022-13 345,000 2.19 12/20/2012 12/19/2022 FHLMC211/30/2020-14 1,790,000 2 OS/30/2072 11/30/2020 FHLMC212/1S/2020-13 515,000 2 06/18/2012 12/18/2020 FNMA 2.5 3/27/2023-13 500,000 2.5 03/27/2013 03/27/2023 Robbinsdale ISD - MN 4.6 2/1/2019 1,000,000 4.6 OS/14/2009 02/Ol/2019 SaintFrancislSD-MN4.44/1/2017 500,000 4.4 04/16/2009 04/Ol/2017 Stillwater ISD - MN 4.75 3/1/2018-16 500,000 4.75 02/17/2009 03/Ol/2018 Washington County Housing 4.25 1/1/2020-10 245,000 425 07/Ol/2010 Ol/Ol/2020 Subtotal 6,541,479 Wells Fargo Advisors FHLB Step 12/28/2022-13 1,999,500 2.972 12/28/2012 12/28/2022 FHLB Step 2/22/2023-13 1,249,375 2.565 02/22/2013 02/22/2023 FHLMC 212/18/2020-13 1,147,125 2.032 06/18/2012 12/18/2020 Subtotal 4,396,000 Investment Portfolio Total 28,965,870 City of Prior Lake - Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA o� pR 'O� Investment Portfolio - Diversification, by Broker (Portfolio) � �t u �, September 30, 2013 �'�WxESO'� Portfolio Holdings Distribution by Portfolio Name NorUNana sea,�ities 22.'3E % Wetls Far�o Advisa's ' 15.1! % Monan Stanky - Smith Barnef+,� - 32.69 % Lea�ue of rYinnesota Citia •_.`_"_._,�.- 29.33 % £•" Days to % of Description Cost Value Maturity Portf olio League of Minnesota Cities 8,559,170 1 29.55% Morgan Stanley - Smith Barney 9,469,221 1,782 32.69% Northland Securities 6,541,479 2,339 22.58% Wells Fargo Advisors � 4,396,000 3,199 15.18% Total / Average 28,965,870 1,597 300.00% City of Prior Lake - Quarterly Investment Report CITY OF PRIOR LAKE, MINNESOTA o� p �d� Investment Portfolio - Diversification, by Security Type � � u � September 30, 2013 '�'rNn�sot Partfolio Holdings Distribution by Sect�ity Type ! ftYiA Eond"_ '1 "�°°--•-_._,.",�loca� Gervemment Inwesbne�t Pod 1.7374 29.33 % ��nc �a�..��- nunic� ssona ».92 x ------°---- 9.�e � c�, o.�� x ; flilB Bond CeitNicate Of D�it 26.4� % 2Q�IE % �� Days to � of �� :; Description �_ � Cost Value Maturity Portfolio Cash 118,700 1 0.41 % Certificate of Deposit �� 5,932,000 833 20.48% FHLB Bond ��,� 7,658,875 3,362 26.44% FHLMC Bond '" ��' � 3,452,125 2,627 11.92% FNMA Bond �y �� 500,000 3,465� 1.73% LGIP ,� � �� , 8,559,170 1 29.55% Municipal Bond �� ` 2,745,000 1,730 9.48% ��° .M_. �, Total � Average � 28,965,870 1,597 100.00% �; City of Prior Lake - Quarterly Investment Report