Title
Acceptance of the Quarterly Investment Report for the quarter ended March 31, 2021.
Body
Summary: Chapter 2, Administration, Article VII (Finance), All of Division 2 (Investment Policy), Section 2-274 Reporting, of the Code of Ordinances of the City of Deer Park, requires the Investment Officers to prepare and submit to City Council an investment report no less than on a quarterly basis. This requirement is in compliance with the Texas Public Funds Investment Act, V.T.C.A., Government Code Ch. 2256 as amended (the "Act"). The City's Investment Officers have worked with the Investment Advisor to prepare this report for the quarter ended March 31, 2021 and each has signed the report.
At March 31, 2021, all City funds were held in various depository accounts or in accounts at TexPool, TexSTAR, or Texas CLASS, which are local government investment pools authorized by the Investment Policy. All three pools continue to maintain their AAAm rating by Standard & Poor's, which is the highest rating a local government investment pool can achieve.
Cash and investment activity included on the attached report is summarized below:
Cash in Wells Fargo (Depository Bank) $ 17,621,440
Money Market Accounts 2,128,044
Certificates of Deposit 61,186,069
TexPool 24,043,415
TexSTAR 7,380,109
Texas CLASS 7,687,668
Total Book Value $120,046,745
Working with the City's investment advisor, the City has diversified the portfolio during the last several years with current investments of $63,314,113 in various depository banks invested in money market accounts and certificates of deposit. At the end of the quarter, these investments represent about 52.7 percent of the portfolio. Cash balances held in the primary depository bank represent about 14.7 percent of the portfolio at March 31, 2021.
These depository investments are earning between 0.20% and 2.58%. Comparatively, rates in the investment pools averaged 0.0470%, 0.0378%, and 0.0555% for the quarter in TexPool, TexSTAR, and Texas CLASS, respectively. While the new depository investments have increased investment earnings during recent years, market rates are declining rapidly. The City will continue to review and evaluate investment opportunities for safety, liquidity, and yield.
At the end of the second quarter of Fiscal Year 2020-2021, investments in TexPool totaled $24,043,415, which is an increase of $2,795 from the previous quarter representing interest earnings. The TexPool funds earned an average 0.0470% for the quarter (January - March 2021) or 6.9 basis points lower than the average for the previous quarter (note: a basis point is equal to 1/100 of a percentage point so 0.01 equals 1 basis point). On March 31, 2021, TexPool was earning 0.0157%.
Investments in TexSTAR at the end of the second quarter of the fiscal year totaled $7,380,109, which is an increase of $690 from the previous quarter representing interest earnings. The TexSTAR funds earned an average 0.0378% for the quarter or 5.5 basis points lower than the average for the previous quarter. On March 31, 2021, TexSTAR was earning 0.0159%.
Investments in Texas CLASS at the end of the second quarter of the fiscal year totaled $7,687,668, which is an increase of $1,054 from the previous quarter representing interest earnings. The Texas CLASS funds earned an average 0.0555% for the quarter or 5.7 basis points lower than the average for the previous quarter. On March 31, 2021, Texas CLASS was earning 0.0437%.
The federal funds rate, still shown as a range, has been at 0.00% - 0.25% since March 15, 2020 following a series of rate decreases by the Federal Open Market Committee (FOMC) starting in late October 2019. Economists are now predicting the rate will remain at zero for the next three to five years. As a result of these rate reductions, market rates have been declining as seen in the investment pool rates and the certificate of deposit reinvestment rates. While the 0.48% weighted average yield for the second quarter ended March 31, 2021 is higher than the 0.06% rolling average yield of the three-month U.S. Treasury Bill for the quarter, it is 21 basis points lower than the 0.69% weighted average yield for the last quarter reflecting the interest rate declines in the current market. The City’s weighted average yield of 0.59% for the fiscal year-to-date through the second quarter of Fiscal Year 2020-2021 is 108.0 basis points lower than the 1.67% weighted average yield for the same period one year ago.
Fiscal/Budgetary Impact:
N/A.
Recommended action
Accept the Investment Report for the Quarter Ended March 31, 2021.