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Home My WebLink AboutFIN 2021-11-22 Item 1B - Report - 2021 3rd Quarter Investment ReportCity of Tukwila INFORMATIONAL MEMORANDUM TO: Finance & Governance Committee FROM: Vicky Carlsen, Finance Director BY: Aaron Williams, Fiscal Manager CC: Mayor Ekberg DATE: November 22, 2021 SUBJECT: 2021 3rd Quarter Cash & Investment Report ISSUE 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 September 30, 2021, the portfolio totaled $71.8 million comprised of $68.8 million in cash and cash equivalents and $3.0 million in longer term investments. The attached "Cash and Investment Report" provides additional details on the cash and investment holdings of the City. Below is a comparison of the current portfolio allocation compared to the prior year-end. Portfolio Allocation 9/30/2021 Operating Cash 8,962,681 12% LGIP 44,725,094 62% Money Market 15,145,165 21% Certificates of Deposit 0% Government Agencies 2,000,000 3% Municipal Bonds 1,000,000 1% 71,832,941 Portfolio Allocation 12/31/2020 Operating Cash 10,358,248 15% LGIP 41,690,157 59% Money Market 15,123,022 22% Certificates of Deposit 2,106,948 3% Government Agencies 0% Municipal Bonds 1,000,195 1% 70, 278, 570 Government Agencies, 3% Certificatesof� Deposit, 0% Money/ Market, 21% Municipal Bonds, 1% \LGIP,62% Operating Cash, 12% 7 INFORMATIONAL MEMO Page 2 INVESTMENT ACTIVITY Total year to date investment earnings through September 30th were $108 thousand. Longer term investments held by the City are projected to pay $21 thousand during the remainder of the year. During the third quarter one bond investment was called and redeemed. In early October an additional $2 million bond investment was purchased for a term of 3.5 years and a yield to maturity of 0.75%. Additional Bond investments will be pursued during the year as opportunities are identified. The chart below provides the investment income Budget to Actual for the Government Funds and Enterprise funds. Investment Income Annual Budget YTD Actuals Pct of Budget Government Funds Enterprise Funds $ 290,500 $ 71,087 24.5% 118,000 37,068 31.4% $ 408,500 $ 108,155 26.5% RETURN ON INVESTMENTS The current overall portfolio yield on September 30th was 0.15% with the Washington State LGIP and the Columbia Bank money market accounts earning 0.087% and 0.18%, respectively. Longer term investment holdings have an average return of 0.79%. POLICY COMPLIANCE AND LIQUIDITY ANALYSIS The investment portfolio profile is within the range of all investment policy parameters. Throughout the pandemic, with the uncertainty of City revenues, longer term bond investments were not pursued, prioritizing liquidity of the portfolio in the short term to ensure we could meet the obligations of the City. This year we have begun expanding our investment holdings, keeping in mind the uncertainty of interest rates and high inflation in the economy. As we accumulate new portfolio holdings, we are targeting the more favorable rates in the 3-5 year maturity range. New bond investments made this year have been in this maturity range, with call options on most, to maximize returns. See "Policy Compliance & Liquidity Analysis" attachment for additional detail. The portfolio benchmark is the 2 -year treasury rate, which is closely tied to the changes in the Federal Reserve Fed Funds Rate. In response to the COVID-19 pandemic, there were significant cuts to the Fed Funds Rate reducing the rate to the current target of 0.00%-0.25%. The 2 -year treasury note rate has slightly increased recently, currently hovering around 0.28% as of September 30th 8 INFORMATIONAL MEMO Page 3 Recent indications from the Federal Reserve Board are that they may begin to rise interest rates in mid -2022 or early 2023; but high inflation and other economic factors could change those plans. The chart to the right illustrates the 2 -year treasury rate over the past 5 years. The investment portfolio will continue to be managed to take advantage of investment opportunities as they arise while maintaining adequate liquidity to meet obligations. RECOMMENDATION Presentation is for information only. ATTACHMENTS 2021-Q3 Cash and Investment Report Policy Compliance & Liquidity Analysis 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2 -Year Treasury Note Rate N II, I, N 00 00 00 00 01 01 01 01 0 0 0 0 .-I '-I 1-1 N N a-1 a-1 .-1 N N N N N N N N 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N \ N N \ N N N N \ N \ N N N N N \ \ a\—I e\—I N . \ a\-1 N N a\—I a\1 a\-1 a\1 N \ \ \ \ \ 01 \ \ \ \ M1 lD 01 N M lD 01 N 111 0 01 N tv1 l0 01 N M LID O1 9 10 Depository CASH & CASH EQUIVALENTS CITY OF TUKWILA Cash and Investment Details CASH & INVESTMENT REPORT September 30, 2021 Investment Maturity Type Date Balance (d) Current Annualized Rate Return US Bank Operating Cash Depository (b) 8,962,681 0.20% 17,925 (e) Washington State Treasurer LGIP Investment Pool (b) 44,725,094 0.09% 38,911 (f) Columbia Bank Money Market (b) 15,145,165 0.18% 27,261 (f) Total Cash & Cash Equivalents 68,832,941 0.12% 84,097 Agency / Issuer INVESTMENTS Agencies Federal Home Loan Bank Federal Farm Credit Bank (a) (c) Rating Investment Purchase Maturity Term Yield to Annualized Moody's Type Date Date Yrs. Face Value Maturity Return Aaa US agency 02/2021 2/24/2026 4.3 1,000,000 0.63% 6,250 Aaa US agency 06/2021 6/15/2026 4.7 1,000,000 0.90% 9,000 TOTAL AGENCIES 2,000,000 0.76% 15,250 Taxable Municipal Bonds Metro Oregon GL Txbl Aaa LTGO 06/2021 6/1/2026 4.7 1,000,000 0.83% 8,300 TOTAL MUNICIPAL BONDS 1,000,000 0.83% 8,300 Total Investments 3,000,000 0.79% 23,550 Interest earned from matured/called investments TOTAL CASH, CASH EQUIVALENTS & INVESTMENTS $ 71,832,941 0.15% $ 107,647 (a) Term is calculated to final maturity or call date if bond has been called. (b) No fixed maturity, funds are available within one day. (c) Yield to Maturity represents average rate for the year for various investment vehicles. (d) Annualized return represents annual earnings at current rate. (e) Represents earning credit from US Bank. City earned interest up to the amount of fees. (f) Current rate reflects most recent interest rate for each depository account. Current Portfolio Yield Current Portfolio Allocation Agencies, Municipal 3% Bonds,1% CDs, 0% Money. Market, 21% LGIP, 62% Cash, 12% 11 12 CITY OF TUKWILA Policy Compliance & Liquidity Analysis CASH & INVESTMENT REPORT September 30, 2021 Portfolio Liquidity Analysis & Maturity Diversification Amount As of Report Date Available Within 1 Year Funds immediately available - US Bank, State LGIP, Money market $ 68,832,941 $ 68,832,941 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 Investments maturing in 1-2 years Investments maturing in 2-3 years Investments maturing in 3-5 years 3,000,000 Investments maturing in 6-10 years Investments maturing in more than 1 year and less than 10 years. TOTALS $ 71,832,941 $ 68,832,941 96% 3,000,000 Available Within 5 Years $ 68,832,941 3,000,000 $ 71,832,941 100% Available in 5 - 10 Years 0% Financial Institution Diversification US Bank Columbia Bank 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 Portfolio Amount $ 8,962,681 15,145,165 % of Total 12.5% 21.1% 0.0% 24,107,846 33.6% 47,725,094 66.4% $ 71,832,941 100.0% Portfolio Amount 8,962,681 44,725,094 15,145,165 2,000,000 1,000,000 % of Total 12.5% 62.3% 21.1% 0.0% 2.8% 1.4% 71,832,941 100.0% POLICY Policy MAXIMUM Met? 50.0% Yes 50.0% Yes 50.0% Yes 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 Weighted Average Maturities: State LGIP and Money Market funds Certificates of deposit Government Agency bonds Municipal bonds Total Investments POLICY MAXIMUM Policy Met? Years 0.0 n/a 4.5 4.7 0.2 3.5 Yes Note: Operating cash and cash equivalents are not factored into the Portfolio Investments weighted average maturity. Performance Analysis Current portfolio yield 0.15% Benchmarks: 2 year treasury 0.25% Local Govt Invst Pool 0.09% 13