HomeMy WebLinkAboutFIN 2019-09-23 Item 2E - Report - Cash and Investment ReportTO:
FROM:
BY:
CC:
DATE:
SUBJECT:
ISSUE
City of Tukwila
INFORMATIONAL MEMORANDUM
Finance Committee
Vicky Carlsen, Finance Director
Aaron Williams, Fiscal Coordinator
Mayor Ekberg
September 23, 2019
2019 1st and 2nd Quarter Cash & Investment Report
Allan Ekberg, Mayor
The Quarterly Cash & Investment Report is provided to the Finance Committee in accordance with
the City's Investment Policy.
SUMMARY OF INVESTMENT POLICY
It is the policy of the City of Tukwila to invest public funds in a manner that will provide maximum
security with the highest investment return while meeting the daily cash flow demands of the City
while conforming to all state and local statutes governing the investment of public funds.
INVESTMENT HOLDINGS
As of June 30, 2019, the portfolio totaled $69.3 million comprised of $50.6 million in cash and cash
equivalents and $18.7 million in longer term investments. The attached "Cash and Investment
Report" provides additional details on the cash and investment holdings of the City.
Portfolio Allocation 06/3012019
Cash
LG IP
Money Market
Certificates of Deposit
Government Agencies
Municipal Bonds
Portfolio Alloi
Cash
LGIP
Money Market
Certificates of Deposit
Government Agencies
Municipal Bonds
12,482,913 18%0
23,319„246 34%
14,830,048 21%
2,015,009 3%
12,867,688 19%0
3,837,879 6%
2,784
ion 12/31/2018
19,861,884
23,030,920
14,642,045
3,538,311
15, 900, 000
5,810,000
82, 783,160
24%
28%0
18%0
4%
19%0
7%
Municipal
Bonds, 6%
... Cash, 18%
Government
Agencies, 19%
Certificates of
Deposit, 3%
Money
Market, 2 %
LGIP, 345
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INFORMATIONAL MEMO
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INVESTMENT ACTIVITY
During the first half of 2019 the city received $476k in interest earnings from the LGIP and
Money Market accounts. Investments held by the City paid interest totaling $236k and a
combined $5 million in investments either matured or were called in the first half of 2019.
No new bond investments were made during this time period.
Additional detail of investment activity is provided below:
Investment Activity
Interest Earnings
Jan -Jun LGIP month interest
Jan -Jun Money Market interest
Investment Earnings
288,326.16
188,002.72
476„ 260a2
1,/212019 WA St Biomed Revenue Bond
1,/23 2019 Farmer Mac
1130/2019 Federal Home Loan Bank
214;/2019 Farmer Mac
2/25/'2019 Federal Home Loan Bank
3/1/2019 Port Anacortes WA GO
3/20)2019 Federal Farm Credit Bank
5/112019 Seattle WA GO
5,/1,/2019 Port of Seattle WA Revenue
5,/12019 Federal Farm Credit Bank
613/2019 Douglas Cnty Sch Dist BAB
616 2019 Auburn WA GO BAB
6/6 2019 Port Tacoma WA GO
6/3 2019 Burien WA GO BAB
6127/2019 Federal Farm Credit Bank
Called Investements
12,,202.50
7„000.00
6,450.00
18,125.00
18,975.00
7,627. 96
14,500 00
7,600 00
70,000 00
20 7'00 00
18,726.00
6,742.56
6,375.00
12„812.56
8,500.00
236,330.40
5/1,/2019 Port of Seattle 'A Revenue (2,000,000)
Investment Maturities
1,/30/2519 Federal Home Loan Bank
3/20 2019 Federal Farm Credit Bank
(1,000,000)
(2,000,000)
In addition to the Bond investments, the City had two certificates of deposit mature during the first
half of 2019. Of the $3.3M matured from the Sound Community Bank CD, $2M was reinvested into
a new 24 Mo CD at 2.97%.
Additional certificate of deposit activity is listed below:
Certificates of Deposit Interest Earnings
Jan -Jun
Jan -Mar
Mar -Jun
Bank of Washington 255k CD
Sound Community Bank $3M CD
Sound Community Bank WM CD
Matured Certificates of Deposit
31412019 Sound Community Bank
6/12019 Bank of Washington
1,72.76
11,364.50
15,009.45
(3,2:R9,675.56)
2:50,000.00)
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INFORMATIONAL MEMO
Page 3
RETURN ON INVESTMENTS
The current portfolio yield on June 30, 2019 was 2.24%. Over the past 12+ months the
returns from the cash accounts held with LGIP and Columbia Bank have steadily increased,
with both accounts earning better than 2.5%.
Government agency bond investments, many of which were purchased in 2017, have an
average return of 1.36%. Municipal bonds currently have an average return of 3.4%.
The chart below illustrates the cash flows from bond investment income over the next 12
months.
12 month Cash Flow Piojecdon
Board Interest Earnings
POLICY COMPLIANCE AND LIQUIDITY ANALYSIS
The portfolio profile is well within the range of all investment policy parameters. Over the
next six-month more than $7 million in bond investments will mature, many of which are
intended to meet the cash flow needs of Public Safety Plan construction. See "Policy
Compliance & Liquidity Analysis" attachment for additional detail.
The investment benchmark of the 2-year treasury was exceeded by almost 20 basis points.
The 2-year treasury rate has been trending downward, peaking in Sept 2018 at 2.82% and
currently at 1.79%. Interest rates from the LGIP and Money Market accounts are following
this same trend having declined slightly in recent months.
The investment portfolio will continue to be managed to take advantage of investment
opportunities as they arise.
RECOMMENDATION
Presentation is for information only.
ATTACHMENTS
2019-Q2 Cash and Investment Report
Policy Compliance & Liquidity Analysis
City of Tukwila Investment Policy (dated Nov 2010)
75
76
Agency / Issuer
CITY OF TUKWILA
Cash and Investment Details
CASH & INVESTMENT REPORT
June 30, 2019
(a) (c) (d)
Rating Investment Purchase Maturity Term Par Book Yeild to Annualized
Moodys Type Date Date Yrs Value Balance Maturity Return
CASH & CASH EQUIVALENTS
US Bank Operating Cash Depository various
Washington State Treasurer LGIP Investment Pool various
Columbia Bank Money Market various
(b)
(b)
(b)
12,482,913 12,482,913 1.00% 124,829 (e)
23,319,246 23,319,246 2.51% 584,357 (f)
14,830,048 14,830,048 2.61% 387,064 (f)
Total Cash & Cash Equivalents
50,632,207 50,632,207 2.17.% 1096,250'
INVESTMENTS
Certificates of Deposits
Sound Community Bank
Certificatet of Deposit 3/4/2019 3/4/2021 1.7 2,000,000 2,015,009 2.97% 59,846 (g)
TOTAL CERTIFICATES OF DEPOSIT 2,000,000
Agencies
Farmer Mac US agency 01/2017 7/23/2019 0.1 1,000,000 999,353 1.40% 14,000
Farmer Mac US agency 08/2017 8/2/2019 0.1 2,500,000 2,497,975 1.45% 36,250
FNMA US agency 08/2017 10/9/2019 0.3 2,400,000 2,384,498 0.65% (h)
Federal Farm Credit Bank US agency 12/2016 12/27/2019 0.5 1,000,000 998,509 1.70% 17,000
Federal Home Loan Bank US agency 06/2017 6/29/2020 1.0 1,700,000 1,696,228 1.69% 28,730
Federal Home Loan Bank US agency 08/2017 8/8/2020 1.1 2,300,000 2,291,067 1.65% 37,950
2,015,009 2.97% 59,846
Federal Farm Credit Bank US agency 09/2017 5/9/2022 2.9 2,000,000 2,000,058 2.07% 41,400
TOTAL AGENCIES 12,900,000 12,867,688 1.36% 175,330
Taxable Municipal Bonds
Washington St Biomedical Aa1 Revenue Bonds 12/2010 7/1/2019 0.0 500,000 500,000 4.88% 24,405
Seattle WA GO LTD Aaa LTGO Refunding 06/2017 11/1/2019 0.3 380,000 382,348 4.00% 15,200
Auburn WA GO LTD Build America AA+ LTGO 06/2017 12/1/2019 0.4 300,000 302,457 4.50% 13,485
Port Anacortes WA GO LTD Aa3 LTGO 12/2010 9/1/2020 1.2 340,000 348,221 4.49% 15,256
Douglas County Washington Sch Dist Aaa UTGO 12/2010 12/1/2020 1.4 780,000 800,834 4.80% 37,440
Port Tacoma WA GO LTD Txbl Ref Aa2 LTGO Refunding 09/2017 12/1/2020 1.4 510,000 513,759 2.50% 12,750
Multnomah County OR GO LTD Aaa Revenue Bonds 08/2017 6/1/2021 2.0 500,000 476,535 2.28% (h)
Burien WA GO LTD Bld Am Bnds Aa2 LTGO 12/2017 6/1/2020 * 1.0 500,000 513,725 5.13% 12,813
TOTAL MUNICIPAL BONDS 3,810,000 3,837,879 3.42% 131,348
Total Investments 18,710,000 18,720,576 1.96% 366,524
Interest earned from maturned/called investments 92,388
TOTAL CASH, CASH EQUIVALENTS & INVESTMENTS 69,342,207 69,352,784 2.24% 1,555,162
(a) On Calleable bonds, term is calculated to final maturity even though call date may
occur first; term of liquid investments is one day; on sinking fund bonds, average maturity
is used to calculate term.
(b) No fixed maturity, funds are available within one day
(c) Yeild to Maturity represents avaerage rate for the year for various investment vehicles
(d) Annualized Return represents actual earnings for the fircal year for bond:
(e) Represents earning credit from US Bank. City earned interest up to the amount of fees
(f) Represents rate in effect for period ending this report
(g) CD matured March 2019; prior CD paid lower rate causing Annualized return to be
lower than CD rate.
(h) Zero coupon bonds, pays no interest until matured
Current Portfolio Yeild
Current Portfolio Allocation
Municipal
Bonds, 6%
Agencies, 19%
CDs, 3%
Money Market,
21%
Cash, 18%
�_LGIP, 34%
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78
CITY OF TUKWILA
Policy Compliance & Liquidity Analysis
CASH & INVESTMENT REPORT
June 30, 2019
Liquidity Analysis & Maturity Diversification
Funds immediately available - US Bank,
State LGIP, Money market
Fixed Maturity Investments, maturing in:
0-90 days after Report Date
91-180 days after Report Date
181-270 days after Report Date
271-360 days after Report Date
Investments maturing in 1 year or less 2019
Investments maturing in 1-2 years 2020
Investments maturing in 2-3 years 2021
Investments maturing in 3-4 years 2022
Investments maturing in 5-10 years 2023
Investments maturing in more than 1 year
and less than 10 years.
TOTALS
Financial Institution Diversification
US Bank
Columbia Bank
Bank of Washington
Sound Community Bank
Investments in Financial Institutions
Investments in US Government and other
non -financial institutions
Total
Investment Mix
Depository
State Investment Pool
Money market
Certificate of Deposit
US Agency
Municipal Bonds
Total
Weighted Average Maturites:
Certificates of deposit
Agencies
Municipal bonds
Total Investments
POLICY MAXIMUM
Policy Met?
As of Report Date
Available
Portfolio Within 1 Year
Amount
$ 50,632,207 $ 50,632,207
4,000,000
4,080,000
2,200,000
10, 280, 000 10,280,000
6,430,000
2,000,000
8,430,000
$ 69,342,207
Portfolio
Amount
$ 12,482,913
14,830,048
2,015,009
29,327,971
40,029,246
$ 69,357,217
Portfolio
Amount
12,482,913
23,319,246
14,830,048
2,015,009
12,900,000
3,810,000
69,357,217
Years
1.7
0.9
1.0
1.0
3.5
Yes
Note: Cash and cash equivalents are available within one day and are not
factored into the Total Investments weighted average maturity.
Available
Within 5
Years
$ 50,632,207
10,280,000
6,430,000
2,000,000
Available in
5 - 10 Years
$ 60,912,207 $ 69,342,207 $
88% 100% 0%
POLICY Policy
% of Total MAXIMUM Met?
18.0% 50.0% Yes
21.4% 50.0% Yes
0.0% 50.0% Yes
2.9% 50.0% Yes
42.3%
57.7%
100.0%
% of Total
18.0%
33.6%
21.4%
2.9%
18.6%
5.5%
100.0%
POLICY
MAXIMUM
insured by PDPC
75.0%
insured by PDPC
insured by PDPC
75.0%
no limit specified in policy
Policy
Met?
Yes
Yes
Yes
Yes
Yes
Yes
Performance Analysis
Current portfolio yield 2.24%
Benchmarks:
2 year treasury 1.79%
Local Govt Invst Pool 2.51%
79
80
City of Tukwila, Washington
INVESTMENT POLICY
Adopted by the
Tukwila City Council
Finance and Safety Committee
Ordinance No. 1916, May 15, 2000,
As updated November 16, 2010
Shawn Hunstock, Finance Director
81
City of Tukwila
Investment Policy
1.0 Policy
It is the policy of the City of Tukwila to invest public funds in a manner that will provide
maximum security with the highest investment return while meeting the daily cash flow
demands of the City, while conforming to all state and local statutes governing the
investment of public funds.
2.0 Scope
This policy applies to the investment of all public funds in the custody of the Tukwila
Finance Director. Funds covered by this policy include all city funds created by the
Tukwila City Council, and are accounted for in the City's Comprehensive Annual Financial
Report (CAFR).
2.1 Fund Types:
• General/Current Expense Funds
• Special Revenue Funds
• Debt Service Funds
• Capital Project Funds
• Enterprise Funds
• Internal Service Funds
• Trust Funds
• Agency Funds
2.2 Funds relating to debt service will be invested in accordance with appropriate bond
documents.
3.0 Prudence
Investments shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the management of their
own affairs, not for speculation, but for investment, considering the probable safety of their
capital as well as the probable income to be derived.
The standard of prudence to be used by investment officials shall be the "prudent person"
standard and shall be applied in the context of managing an overall portfolio. Investment
officers acting in accordance with written procedures and the investment policy and
exercising due diligence shall be relieved of personal responsibility for an individual
security's credit or market price changes, provided deviations from expectations are
reported in a timely fashion and appropriate action is taken to control adverse
developments.
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City of Tukwila
Investment Policy
4.0 Objectives
The primary objectives, in priority order, of the City's investment activities shall be:
Safety: Safety of the principal is the foremost objective of the investment program.
Investments of the City shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective, diversification
is required in order that potential losses on individual securities do not exceed the
income generated from the remainder of the portfolio.
4:4 Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the
City to meet all operating requirements that might be reasonably anticipated.
• Yield: The City's investment portfolio shall be designed with the objective of attaining
a market rate of return throughout budgetary and economic cycles, taking into account
the City's investment risk constraints and the cash flow characteristics of the portfolio.
See 13.0.
5.0 Delegation of Authority
Authority to manage the City's investment program is derived from Ordinance 1916,
adopted by the Tukwila City Council on May 15, 2000. Management responsibility of the
investment program is vested in the City of Tukwila Financial Director under the express
authority granted in RCW 39.29.020.
5.1 The City Finance Director may appoint an Investment Officer whose responsibilities
will include initiating daily transactions in the investment portfolio based on
liquidity and cash flow requirements of the City.
5.2 Investments relating to bond proceeds shall be made consistent with 4.0,
"Objectives."
5.3 Written procedures shall be established for the operation of the investment program
consistent with this investment policy.
6.0 Ethics and Conflict of Interest
6.1 Officers and employees involved in the investment process recognize that the
investment portfolio is subject to public review and evaluation. The overall program
will be designed and managed with a degree of professionalism that is worthy of the
public trust.
6.2 Officers and employees involved in the investment process shall refrain from
personal business activity that could conflict with the proper execution of the
investment program, or which could impair their ability to make impartial
investment decisions. Employees and investment officials shall disclose any
material financial interests in financial institutions that conduct business within this
jurisdiction, and they shall further disclose any personal financial/investment
positions that could be related to the performance of the City's portfolio. Employees
and officers shall subordinate their personal investment transactions to those of the
City, particularly with regards to the timing of purchases and sales.
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City of Tukwila
Investment Policy
7.0 Authorized Financial Dealers and Institutions
7.1 Pursuant to state statutes (RCW 39.58), the deposit of public funds and the
placement of "investment deposits" (i.e. time deposits, money market deposit
accounts and savings deposits of public funds), will be placed only with institutions
approved by the Washington Public Deposit Protection Commission (PDPC) as
eligible for deposit of public funds. The maximum amount placed with any one
depository will not exceed the net worth of the institution as determined by the
PDPC.
7.2 In addition, the Finance Director will maintain a list of approved broker/ dealers that
are authorized to provide investment services to the City.
7.2.1 Authorized broker/dealers must maintain an office and be currently registered
in the State of Washington.
7.2.2 Authorized broker/dealers will be limited to primary dealers or other dealers
that qualify under SEC Rule 15C3-1, the Uniform Net Capital Rule.
7.2.3 All approved firms and the individuals that represent them are required to read
this policy and certify that they understand and will comply with the City's
investment objectives and constraints.
7.2.4 Broker/dealers that have been selected to provide investment services to the
City are required to submit an audited financial statement annually to the
Finance Director and proof of National Association of Securities dealers
certification.
The Finance Director will conduct an annual review of the financial condition of the firms.
The current audited financial statement is required to be on file for each financial
institution and broker/dealer with whom the city invests.
8.0 Authorized Investments
State statutes and this investment policy limit the types of securities authorized for
investment by the City. The principal governing statutes are RCW 39.59 and RCW 39.60.
The Finance Director may further restrict eligible investments by this policy at his/her
discretion. Authorized investments include (but are not limited to):
8.1 U.S. Treasury Securities.
8.2 U.S. Agency Securities (i.e. obligations of any government -sponsored corporation
eligible for collateral purposes at the Federal Reserve).
8.3 Certificates of Deposit, Money Market Deposit Accounts and savings deposits with
qualified depositories within statutory limits as promulgated by the PDPC at the time
of investment.
8.4 Bankers Acceptances (BA's) purchased on the secondary market with a rating of A-
1, P-1, its equivalent or better General Obligation Bonds of a state or local
government which have at the time of the investment one of the three highest credit
ratings of a nationally -recognized rating agency.
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City of Tukwila
Investment Policy
8.5 The Washington State Local Government Investment Pool GIP).
9.0 Safekeeping and Custody
9.1 Securities purchased by the Finance Director are to be held in a custodial account in
the safekeeping or trust department of a bank acting as third party custodian for the
City of Tukwila.
9.2 All security transactions conducted by the custodian on behalf of the City of Tukwila
are to be on a delivery -versus -payment (DVP) basis.
9.3 Certificates of Deposit, transaction receipts for Money Market Deposit Accounts or
savings deposit accounts will be held by the Finance Director.
10.0 Diversification
The City of Tukwila will diversify its investments by security type and institution.
10.1 No more than fifty percent (50%) of the City's portfolio, at the time of purchase,
shall be in any single financial institution.
10.2 Except, that no more than seventy-five (75%) of the City's portfolio, at the time of
purchase, shall be invested in the Washington Local Government Investment Pool.
10.3 Investment of 100% of the City's portfolio in U.S. Treasury securities shall be
allowed; this is a risk free investment and, in the event of unforeseen circumstances,
the City shall have the ability to invest the entire portfolio in a risk free investment.
10.4 No more than seventy-five percent (75%) of the City's portfolio, at the time of
purchase, shall be invested in U.S. Agency securities.
10.5 The City's Finance & Safety Committee can authorize a variance to 10.1, 10.2 or
10.4 prior to purchase, if it is deemed in the best overall benefit to the City.
11.0 Maturities
To the extent possible, and to preclude the sale of securities that could result in a loss,
investments will be made to coincide with anticipated cash flow requirements.
11.1 At the time of investment, a minimum of thirty percent (30%) of the portfolio will be
comprised of investments maturing or available within one year.
11.2 At the time of investment, eighty percent (80%) of the portfolio will be comprised of
investments maturing or available within five (5) years and no instruments shall have
a maturity exceeding ten (10) years, except when compatible with a specific fund's
investment needs.
11.3 To provide for ongoing market opportunity, investment maturities should be
laddered or staggered to avoid the risk resulting from overconcentration of portfolio
assets in a specific maturity.
11.4 The average maturity of the portfolio shall not exceed three and one half (3 V2) years
or forty two (42) months.
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City of Tukwila
Investment Policy
11.5 Any variance to 11.1, 11.2, 11.3 or 11.4 must be approved by the Finance & Safety
Committee prior to occurrence.
12.0 Internal Controls
The Finance Director shall establish an annual process of independent review by an
external auditor. This review will provide internal control by assuring compliance with
policies and procedures. Such reviews may result in recommendations to change operation
procedures to improve internal controls. Controls shall be designed to protect against loss
of public funds due to fraud, error, misrepresentation or imprudent actions.
13.0 Performance Standards / Benchmarks
The investment portfolio will be designed to obtain an average rate of return during
budgetary and economic cycles which meets or exceeds the average two-year Treasury
note rates for the corresponding time period computed without regard to funds set aside for
operating liquidity requirements or for specific purposes. This performance standard shall
take into account the City's investment risk constraints and cash flow needs.
14.0 Reporting
The Finance Director will submit a quarterly report to the City's Finance & Safety
Committee that summarizes the current portfolio position and performance. These
reports shall provide an accurate and meaningful representation of the investment
portfolio, its performance versus the established benchmark, and proof of compliance
with the investment policy.
15.0 Investment Policy Adoption
Adoption of this policy is made pursuant to the provisions of RCW 36.48.070.
Adopted by the Finance and Safety Committee of the City
Council of the City of Tukwila by ordinance 1916, May 15,
2000, as updated November 2, 2010.
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