Title
Acceptance of Quarterly Investment Report (April - June 2017).
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 and have signed this report for the quarter ended March 31, 2017.
At June 30, 2017, all City funds were held in various depository accounts or in accounts at TexPool or TexSTAR, which are local government investment pools authorized by the Investment Policy. Both 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) $ 21,761,072
Money Market Accounts 12,066,855
Certificates of Deposit 23,085,444
CDARS Program 2,030,439
TexPool 31,747,091
TexSTAR 24,726,925
Total Book Value $115,417,826
Working with the City's investment advisor, the City has diversified the portfolio during the past year with current investments of $37,182,738 in various depository banks through money market accounts, certificates of deposit, and CDARS (Note: CDARS is network of financial institutions that provides an investment opportunity for deposits in excess of the standard FDIC insurance maximum of $250,000. One bank acts as custodian for the CDARS deposits at the various other member banks. As an example, a $1,000,000 deposit is placed with seven banks, and all balances are covered by FDIC insurance. For the banks, this is cheaper than holding collateral if the single deposit exceeded $250,000. Then, rather than administering seven separate investments and receiving seven separate account statements for the investment, the City receives one consolidated account statement from the custodian bank.)
The depository investments are earning between 0.55% and 1.36%. Comparatively, rates in the investment pools averaged 0.7876% and 0.7769% for the quarter in TexPool and TexSTAR, respectively. The new depository investments have increased investment earnings, and the City continues to review and evaluate investment opportunities for safety, liquidity, and yield.
At the end of the third quarter of Fiscal Year 2016-2017, investments in TexPool totaled $31,747,091, which is a net decrease of $4,593,934 from the previous quarter. This net decrease reflects withdrawals of approximately $4,664,000 to cover bond fund expenditures offset by $70,069 of interest earnings for the quarter. The TexPool funds earned an average 0.7876% for the quarter (April - June) or 21.4 basis points higher 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). At June 30, 2017, TexPool was earning 0.9566%.
Investments in TexSTAR at the end of the third quarter of the fiscal year totaled $24,726,925, which is a net decrease of $3,541,946 from the previous quarter. This net decrease reflects withdrawals of approximately $3,595,700 to cover bond fund expenditures offset by $53,762 of interest earnings for the quarter. The TexSTAR funds earned an average 0. 7769% for the quarter or 20.2 basis points higher than the average for the previous quarter. At June 30, 2017, TexSTAR was earning 0.9675%.
After two years of steady declines, interest rates have been trending upward including an increase in the Fed funds rate, still shown as a range and currently 1.00% - 1.25%. As a result of market changes, the City continues to see higher interest earnings. The 0.81% weighted average yield for the third quarter ended June 30, 2017 is below the 0.91% average yield of the three-month U.S. Treasury Bill for the quarter. The City’s weighted average yield for the fiscal year-to-date at June 30, 2017 is 0.61%, which is 9.0 basis points higher than the previous quarter. Currently about 18.9% of the City’s portfolio is in cash accounts.
Fiscal/Budgetary Impact:
N/A.
Recommended action
Accept the Investment Report for the Quarter Ended June 30, 2017.