Title
Acceptance of Quarterly Investment Report (April - June 2018).
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 June 30, 2018.
At June 30, 2018, 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) $ 16,106,396
Money Market Accounts 14,291,803
Certificates of Deposit 29,785,033
TexPool 23,752,529
TexSTAR 26,074,126
Total Book Value $110,009,887
Working with the City's investment advisor, the City has diversified the portfolio during the last few years with current investments of $44,076,836 in various depository banks through money market accounts and certificates of deposit. These investments represent about 40 percent of the portfolio.
These depository investments are earning between 1.25% and 2.75%. Comparatively, rates in the investment pools averaged 1.7324% and 1.7287% 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 2017-2018, investments in TexPool totaled $23,752,529, which is a net decrease of $6,788,687 from the previous quarter. This net decrease reflects withdrawals of approximately $6,910,937 to cover bond fund expenditures offset by $122,250 of interest earnings for the quarter. The TexPool funds earned an average 1.7324% for the quarter (April - June) or 34.63 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). On June 30, 2018, TexPool was earning 1.9206%.
Investments in TexSTAR at the end of the third quarter of the fiscal year totaled $26,074,126, which is a net decrease of $3,543,795 from the previous quarter. This net decrease reflects withdrawals of approximately $3,667,011 to cover bond fund expenditures offset by $123,216 of interest earnings for the quarter. The TexSTAR funds earned an average 1.7287% for the quarter or 34.83 basis points higher than the average for the previous quarter. On June 30, 2018, TexSTAR was earning 1.9627%.
The federal funds rate, still shown as a range, was last increased on June 13, 2018 to 1.75% - 2.00% (from the previous 1.50% - 1.75%). As a result of market changes, the City continues to see higher interest earnings on the portfolio investments. The 1.63% weighted average yield for the third quarter ended June 30, 2018 is below the 1.88% rolling 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, 2018 is 1.33%, which is 15.0 basis points higher than the previous quarter. Currently about 14.6 percent of the portfolio is in the City’s depository bank.
Fiscal/Budgetary Impact:
N/A.
Recommended action
Accept the Investment Report for the Quarter Ended June 30, 2018.