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Home My WebLink AboutFY 2016 Annual Investment ReportCity of Euless Annual Investment Report Fiscal Year 201 5-16 201 North Ector Drive Euless, Texas 76039 www.eulesstx.gov Investment Committee Meeting 1/10/2017 * Compliance Summary - Legislative Requirements Introduction Investment Strategy Compliance * Annual Review, Fiscal Year 2016 I. Portfolio Summary II. Performance Summary III. Interest Income Summary IV. Collateral Review V. Broker Selection Process VI. Summary * Certification * Minutes from 9113/2616 * Appendices Appendix A - Investment Portfolio by Fund Appendix B - Investment Purchases Appendix C - Investment Maturities Appendix D - Investment Types and Institutions * Investment Policy Broker / Dealers Economic News INTRODUCTION This report is written and submitted in accordance with Chapter 2256 of the Texas Government Code entitled the "Public Funds Investment Act," which states that "at least once each year, the investment officer of a state agency or political subdivision shall prepare a written report concerning the agency's or subdivision's local funds investment transactions for the preceding year and describing in detail the investment position of the agency or subdivision as of the date of the report. The City's investment policy designates the Investment Officers as the responsible managers for the City's investment program. The daily investment procedures are monitored by the City's Finance department and reviewed by the investment officers. This report has been signed by each investment officer as required by the Public Funds Investment Act and the City's investment policy. In compliance with the City's investment policy, the Finance department fulfills four main objectives: compliance, safety, liquidity, and yield, in that order. Compliance is maintained through regular reporting to City management on a monthly, quarterly and annual basis. Safety is insured by 1) investing only in securities allowed by Chapter 2256 of the Texas Government Code entitled the "Public Funds Investment Act"; 2) using delivery vs, payment for all purchases; 3) protecting all non-government securities (cash and bank certificates of deposit) with collateral in the form of government securities which are pledged to the City of Euless and safekept by the Federal Reserve Bank; and 4) diversifying investment purchases into different security markets to minimize individual market risk. Liquidity is met by matching investment terms to future operating cash needs such as payroll, accounts payable, debt service, and capital improvement disbursements. The City also utilizes money market funds and local government investment pools to provide daily liquidity needs. The yield or rate of return which the City receives is measured against the 90 -day treasury bill yield as set by the investment policy. The information contained in this report will quantitatively and graphically demonstrate the achievement of these City objectives for Fiscal Year 2015-16. Investment Strategy Compliance The strategy for all pooled funds is to assure that cash flows are matched with projected needs and provide adequate liquidity and safety. This may be accomplished by purchasing high quality securities in a laddered structure or utilizing an investment pool. Furthermore, the following purposes are also considered when investing. -Operating Funds will be structured in such a way as to minimize volatility during economic cycles. This may be accomplished by purchasing high quality short-term securities. The weighted average maturity on these funds will remain within the 6 to 9 month range. These funds include: 101 General Fund 201 Hotel -Motel Tax Fund 202 Juvenile Case Fund 210 1/2 Cent Sales Tax Operations Fund 220 Crime Control & Prevention District Fund 221 Police Seized Asset Fund 230 Police Drug DEA Awards Fund 231 Police Drug State Awards Fund 240 Car Rental Tax Fund 245 Glade Parks PID Fund 250 Glade Parks TIRZ Fund 260 Cable PEG Fund 265 Glade Parks PID #2 Fund 270 Midtown PID Fund 275 Midtown TIRZ #4 Fund 501 Water & Wastewater Fund 504 Service Center Fund 510 Drainage Utility Fund 520 Recreation Classes Fund 521 Arbor Daze Fund 530 Softball World Operations Fund 540 Golf Course Operations Fund 550 Parks at Texas Star Operations Fund 601 Equipment Replacement Fund 610 Health Insurance Fund 615 Risk Management Fund -Funds for Capital Improvement Projects (CIP) and Special Purposes may purchase securities which allow for flexibility and unanticipated project outlays by having a portion of their investments in highly liquid securities. The stated final maturity dates of securities held should not exceed the estimated project completion date. These funds include: 301 Developer's Escrow Fund 305 Streets CIP Fund 310 1/2 Cent Sales Tax CIP Fund 320 General Capital Projects Fund 321 Redevelopment Fund 322 Midtown Development CIP 325 Police Facility Construction Fund 330 Car Rental CIP Fund 502 Water & Wastewater CIP Fund 505 Water impact Fees Fund 508 Wastewater impact Fees Fund 511 Drainage CIP Fund 543 TSGC CIP Fund 552 TSSC CIP Fund -Debt Service Funds should assure adequate liquidity to cover the debt service obligation on the required payment date. These funds include: 401 Debt Service/General Obligation Fund 402 Star Center Debt Service Fund 403 Glade Parks Debt Service Fund 404 Midtown Development Debt Service Fund 410 1/2 Cent Sales Tax Debt Service Fund 506 Water & Wastewater Debt Service Fund 531 TSSC Debt Service Fund 541 TSGC Debt Service Fund -Emergency, Contingency, Operating and Debt Service Reserve funds will have the ability to generate a dependable revenue stream to the appropriate fund from securities with a low degree of volatility. Such securities will tend to hold their value during economic cycles. The stated final maturity dates of securities held should not exceed five years. These funds include: 102 General Fund Emergency Fund 103 General Fund Contingency Fund 211 1/2 Cent Sales Tax Debt Reserve Fund 240 Car Rental Tax Fund ($2,000,000 Reserve) 323 Midtown Development Reserve Fund 503 Water & Wastewater Debt Reserve Fund 507 Water & Wastewater Emergency Fund 509 Water & Wastewater Rate Stabilization Reserve Fund 532 TSSC Reserve Fund 542 TSGC Reserve Fund 705 Star Center Escrow Fund Based on the above strategies, the investment portfolio reported herein is in compliance with the City's adopted investment policy. 7.1 Janina Jewell Director of Finance Jackie Theriot Assistant Director of Finance 3 I. PORTFOLIO SUMMARY The City's investment portfolio at the end of the fiscal year. September 30, 2016, is summarized by instrument as shown below. Distribution by Instrument % of Average Avg. Yield Instrument $ Cost Portfolio Yield Prior Qtr, Agencies & CD $ 29,567,180 35.57% 0.24% 0.27°fo Investment Pools $ 53,564,376 64.43% 0.24% 0.19% $ 83,131,556 100.00% 0.48% 0.46% The Distribution by Instrument table shows that the majority of City funds, approximately 64% are invested in local government investment pools, while the remaining 36% is invested in government agencies and a CD. As of the date of this report, the weighted average yield on the portfolio was .48%. When compared to prior quarter levels, the yield on the portfolio has remained relatively stable. The portfolio composition below demonstrates the diversity within the portfolio. Portfolio Composition as of September 30, 2016 4 B of TX 5% TexPool 26% TexStar 33 I. PORTFOLIO SUMMARY (CONTINUED) The City's investment portfolio at the end of the fiscal year, September 30, 2016, is summarized by maturity as shown below, Distribution by Maturity # of months $ Cost Overnight $ 53,564,376 < 1 mo $ 669,025 up to 6 mos $ 12,459,150 6 to 9 mos $ 4,090,662 9 to 12 mos $ 2,550,830 12 to 18 mos $ 9,797,513 $ 83,131,556 % of Portfolio 64.4% 0.8% 15,0% 4.9% 3.1% 11.8% 100.0% The Distribution by Maturity table reflects the degree of liquidity in the City's portfolio. Currently, access to 64% of the portfolio is available within 24 hours, with an additional 16% available within 6 months. This liquidity strategy was followed to meet cash flow requirements for construction projects, payroll, debt service, and other operating expenses. An additional 8% of the portfolio matures within one year. Currently, the City has 12% of the portfolio invested between 12 - 18 months. The City currently has no investment maturing past 18 months, The weighted average maturity on the portfolio is currently 83.94 days. 12 to 18 mos Irnaestrnent Maturity Distribution as of September 30, 2016 9 to 12 mosii $2.6 6to9mos up to 6 mos 1 mo $0.7 $4.1 $9.8 Overnight $12.5 $0.0 $9.0 $18.0 $27.0 Shown in millions $36.4 $45.0 $54.0 5 I. PORTFOLIO SUMMARY (CONTINUED) The City's investment portfolio at the end of the fiscal year, September 30, 2016, is summarized by institution as shown below. Institution Coastal Securities Duncan Williams Hilltop Securities Mutual Securities Samco Capital Vining Sparks TexPool TexStar B of TX Distribution by Institution $ Cost $ 5,000,000 $ 4,501,380 $ 4,250,685 $ 3,736,416 $ 10,031,959 $ 1,999,740 $ 21.750 451 $ 27 548,655 $ 4,312,270 $ 83,131,556 % of Portfolio 6% 6% 5% 12% 2% 26% 33% 5970 1 00% The City strives to not only diversify the portfolio by the type of instruments that are purchased, but also by the institution in from which they are purchased. The City uses the following guidelines: - No more than 10% in repurchase agreements, - No more than 33% in investment pools with any single institution, -No more than 33% in money market mutual funds, and - No more than 33% by individual brokerage firms. The chart below demonstrates the City's compliance with the above guidelines. B of TX TeKStar TexPool Vining Sarnco Mutual Hilltop Duncan Investments by Institution as of September 30, 2016 $4.3 mil $2.0 $3.7 • $4.3 $4.5 Coastal griffi‘$5.o $10.0 $21.8 $27.5 $0.0 $ 7.0 $14.0 Shown in millions $21.0 $28.0 City of Euless Pooled Portfolio Summary for Quarter Ending September 30, 2016 Cost Book Market Principal Only Value Value Investments at June 30, 2016* $ 83,166,823 * $ 83,121,306 $ 83,158,804 Investment Purchases/Dividends $ 20,020,030 Investment Maturities $ (20,055,297) Investments at September 30, 2016 $ 83,131,556 $ 83,093,689 $ 83,125,415 Janina Jewell Director of Finance Jackie Theriot Assistant Director of Finance * Beginning balance was adjusted by $649 for a June end -of -month payment from Texas Water Development Board escrow account at Bank of Texas that was corrected in a subsequent month. Summary of Investments by Fund The following is a summary of cash and investments held by each fund at June 30, 2016 and September 30, 2016. The changes include all investment purchases, maturities, revenues, expenses, and transfers that occurred during the fourth quarter of FY2016. Cash & investment at Market Value 6/30/2016 Cash & Investment at Market Value 9/30/2016 Increase/ Decrease In Fund 101 General Fund 102 General Fund Emergency 103 General Fund Contingency 201 Hotel -Motel Tax Fund 202 Juvenile Case Fund 210 1/2 Cent Operations Fund 211 1/2 Cent Debt Reserve 220 CCPD 221 Police Seized Asset Fund 230 Police Drug DEA Awards 231 Police Drug State Awards 235 Public Safety Grant Fund 236 Police Grant Fund 237 Texas Transportation Grant 240 Car Rental Tax Fund 240-R Car Rental Reserve Fund 245 Glade Parks PID 250 Glade Parks TIRZ #3 260 Cable PEG Fund 265 Glade Parks PID #2 270 Midtown PID 275 Midtown TIRZ #4 301 Developer's Escrow Fund 305 Streets CIP 310 112 Cent Sales Tax CIP 320 General CIP Fund 321 Redevelopment GIP Fund 322 Midtown Development CIP 323 Midtown Development Reserves 325 Police Facility CIP 330 Car Rental CIP Fund 401 Debt Service/General 402 Star Center Debt Service 403 Glade Parks Debt Service 404 Midtown Development Debt Service 410 EDC Debt Service 501 Water & Wastewater Fund 502 Water & Wastewater-CIP 503 Water & Wastewater Bond Reserve 504 Service Center Fund 505 Water Impact Fees 506 Water & Wastewater -Debt Service 507 Water & Wastewater -Emergency 508 Wastewater Impact Fees 509 WIWW Rate Stabilization 510 Drainage Utility 511 Drainage CIP 512 Drainage Reserve 520 Recreation Classes Fund 521 Arbor Daze Fund 530 Softball World Operations 531 TSSC Debt 532 TSSC Debt Reserve 540 TSGC Operations 541 TSGC Debt 542 TSGC Debt Reserve 543 TSGC CIP Fund 550 Parks @ Texas Star 552 TSSC CIP 601 Equipment Replacement 610 Health Insurance Fund 615 Risk Management Fund 701 Payroll Clearing Fund 705 Star Center Escrow TOTAL 12,641, 982 500,902 500,205 283,886 215,816 2,143,820 186,923 811,305 531,564 336,246 160,987 1,101 3,543 (14,594) 4,323,109 2,002,376 750,000 184,157 457,520 1,962,490 826,676 999,430 1,087, 843 205,992 12,174,096 1,000,663 454 2,219,379 1,868,335 593,687 243,135 16,635 127,160 4,911,314 8,384,641 641,858 213,869 1,515,272 616,948 500,000 574,700 1,496,945 335,695 1,133,258 366,057 16,435 (479,609) (32,791) 406,800 305,529 (28,955) 959,386 238,557 444,972 2,716,656 2,558,065 2,976,160 2,109,620 518,501 1,421,776 11,590, 973 500,449 500,232 413,188 220,853 2,422,976 187,365 977,915 432,691 334,135 165,128 19,875 (14,223) 7,315,059 2,001,627 750,000 101,000 491,347 35,000 1,978,116 484,281 971,651 1,101,547 207,230 11,300,474 1,000,679 1,589,386 2,079,245 167,775 84,541 2,163 5,908,722 6,214,871 640,638 244,305 1,484,468 91,813 500,000 495,656 1,455,393 310,533 1,133,290 301,717 16,439 (492,391) 419,685 204,098 54,913 972,210 232,460 467,867 2,644,121 2,765,333 3,227,567 2,279,778 526,401 1,421,887 83,968,479 8 82,934,448 (1,051,010) Operating expenses (453) 27 129,302 Operating revenues 5,037 279,156 Operating revenues 443 166,610 Operating revenues (98,873) Body Armor expenses (2,112) 4,141 18,773 (3,543) 371 2,991,950 Operating Revenues (749) 0 (83,157) Transfer to Debt 33,827 Cable Franchise PEG Fees 35,000 15,626 (342,395) Capital outlay (27,779) 13,705 1,238 (873,622) Capital outlay 16 (454) (629,994) Capital outlay 410,910 (425,913) Debt service payments (243,135) Debt service payments 67,905 (124,997) Debt service payments 997,408 Operating Revenues (2,169,770) Capital outlay (1,220) 30,436 (30,804) (525,135) Debt service payments (79,044) (41,553) (25,162) 34 (64,340) Operating expenses 4 (12,782) 32,791 12,885 (101,431) Operating expenses 83,868 Transfer for debt service payment 12,824 (6,097) 22,895 (72,535) 207,268 Transfers for equip replacement 251,407 Transfer from other funds 170,156 Transfer from other funds 7,900 111 II, PERFORMANCE SUMMARY Cash and InvestmentBalances - Full utilization of funds and minimization of idle cash is necessary to pursue additional interest income revenues for the City. The average percent of invested funds is 100% for FY2016. The monthly data below shows the continued utilization of City funds through investments. Consolidated Invested Percentage FY2015 Cash Balance Invested October $ (198,600) $ 63,731,625 100% November $ 115,485 $ 69, 380,120 100% December $ 220,499 $ 67,322,792 100% January $ 1,721,410 $ 69,319,182 98% February $ (226,564) $ 71,613,082 100% March $ (162,296) $ 61,450,653 100% April $ (401,266) $ 61,112,712 101% May $ 131,804 $ 62,873,859 100% June $ 209,414 $ 63,389,851 100% July $ 291,362 $ 62,990,544 100% August $ 342,308 $ 62,744,536 99% September $ 269,578 $ 71,189,589 100% Average $ 192,761 $ 65,593,212 100% Consolidated Invested Percentage FY2016 Cash Balance Invested October $ 566,130 $ 70,586.706 99% November $ 280,577 $ 71,585,488 100% December $ 474,640 $ 75,829,340 99% January $ 2,060,724 $ 95,706,047 98% February $ (453,332) $ 99,622,556 100% March $ (569,624) $ 88,738,696 101% April $ 1,299,527 $ 88,608,435 99% May $ 460,730 $ 84,051,837 99% June $ 809,675 $ 83,166,174 99% July $ 198,809 $ 83,974,406 100% August $ 165,238 $ 83,502,191 100% September $ (188, 025) $ 83,131, 556 100% Average $ 425,422 $ 84,042,036 100% This graph shows how the City's funds continue to be invested, always in pursuit of 100% 105 00% o r 100.00° • 95 00% as • 90.00% _ d1 • 35.00%._ 2001 2008 2009 2010 2011 2012 2013 2014 2015 2016 HIscal Year 9 Cash management performance - effectiveness of the cash management program has been measured utilizing actual figures for FY2016 as shown below: Average City's Number Estimated 90 -day Invested Days in Interest Month T-bill Yield Balance Month Earnings October 0.08% $ 70,586,706 31 $4,796 November 0.22% $ 71,586,488 30 $12,944 December 0.16% $ 75,829,340 31 $10,304 January 0.32% $ 95,706,047 31 $26,011 February 0.33% $ 99,622,556 29 $26,120 March 0.21% $ 88,738,696 31 $15,827 April 0.22% $ 88,608,435 30 $16,022 May 0.34% $ 84,051,837 31 $24,271 June 0.26% $ 83,166,174 30 $17,772 July 0.27% $ 83,974,406 31 $19,257 August 0.33% $ 83,502,191 31 $23,403 September 0.28% $ 83,131,556 30 $19,132 Estimated earnings at benchmark yields $215,859 Actual FY2016 interest income (un -audited) $376,405 Earnings over benchmark $160,546 Annual Average 0.25% $ 84,042,036 $210,105 Key rate comparisons - an objective of the investment policy is for the City's average rate of return to consistently exceed that of the three-month U.S. Treasury Bill, as stated before. Therefore, returns for both have been presented for comparative purposes below. Benchmark City's 90 -day Wtd Avg Month T-bill yield Portfolio Yid Difference October 0.08% 0.38% 0.30% November 0.22% 0.37% 0.15% December 0.16% 0.43% 0.27% January 0.32% 0.42% 0.10% February 0.33% 0.44% 0.11% March 0.21% 0.44% 0.23% April 0.22% 0.46% 0.24% May 0.34% 0.46% 0.12% June 0.26% 0.46% 0.20% July 0.27% 0.47% 0.20% August 0.33% 0.47% 0.14% September 0.28% 0.48% 0.20% Average 0.25% 0.44% 0.19% During FY2016, the Federal Reserve had one rate hike in December 2015. The Federal Open Market Committee has kept the target fed funds rate at 0.25% throughout the year and currently anticipates economic conditions are likely to warrant maybe another rate hike in December 2016. The average yield on the City's portfolio has increased slightly from month-to-month since January. Therefore, the City's portfolio continues to surpass the benchmark 90 -day T-bill rate by an average of 19 basis points for the year. 10 Interest Income Summary' III. INTEREST INCOME SUMMARY FY12 Audit FY13 Audit FY14 Audit FY15 Audit FY16 Unaudited FY16 Budgeted $193,366 $146,562 $104,437 $167,649 $376,405 $85,845 ntere st Earnings $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 FY12 Audit FY13 Audit FY14 Audit FY15 Audit FY16 FY16 Budgeted Unaudited nterest income exceeded the budgeted level for fiscal year 2016. When compared to prior year, interest earnings have increased. This increase can be attributed to the reinvestment of proceeds from maturing securities into slightly higher yield investments. 11 Interest Income By Fund For Fiscal Year Ending September 2016 # Fund FY 15 FY 15 Actual FY 16 FY 16 Actual Diff FY16 Budget Audited Budget (Unaudited) Bud. -Act. 101 General 330,000 $55,022 $35,000 $97,775 $62,775 201 Hotel/Motel 50 105 70 830 $760 202 Juvenile Case Fund 30 91 30 536 $506 210 Half Cent Sales Tax -Operations 800 3,441 1,400 5,715 $4,315 211 Half Cent Sales Tax -Reserve 9,220 10,125 0 5,387 $5,387 220 Crime Control Prevention District 100 245 100 2,207 $2,107 221 Police Seized Asset Funds 0 509 0 1,673 $1,673 230 Euless DEA Fund 500 55 500 905 $405 231 Police DEA State Awards 500 63 500 425 ($75) 240 Car Rental 15,000 25,747 15,000 49,096 $34,096 245 Glade Parks PID 0 5 0 0 $0 250 Glade Parks TIRZ 0 3 0 0 $0 260 Cable PEG Fund 0 183 0 1,219 $1,219 301 Developer's Escrow 0 3,763 0 8,038 $8,038 305 Streets CIP 0 872 0 2,312 $2„312 310 Half Cent Sales Tax - CIP 0 573 0 2,843 $2,843 320 G.O. GIP 0 560 0 3,133 $3,133 321 Redevelopment GIP Fund 122 163 0 641 $641 322 Midtown Development ClP 0 0 0 0 $0 323 Midtown Development Reserves 0 0 0 0 $0 325 Police Facility CIP 11 2 8 0 ($8) 330 Car Rental CIP 0 2,898 0 15,290 315,290 401 GO Debt Service 500 680 500 3,069 32,569 402 Star Centre Debt 300 136 300 808 $508 403 Glade Parks Debt Service 0 37 0 0 $0 404 Midtown Debt Service 0 0 0 36,047 $36,047 410 EDC Debt Service 0 167 0 0 $0 501 Water and Wastewater 12,000 22,185 12,000 40,078 $28,078 502 Water and Wastewater CIP 0 2,126 0 30,559 $30,559 503 Water and Wastewater Reserve 0 204 0 0 $0 504 Service Center Fund 0 0 0 0 $0 505 Water Impact Fees 0 3,489 0 5,150 $5,150 508 Wastewater Impact Fees 0 265 0 1,529 31,529 509 W/WW Rate Stabilization 5,000 5,223 5,000 4,546 ($454) 510 Drainage 120 111 80 829 $749 511 Drainage CIP 0 1,057 0 2,785 $2,785 520 Recreation Classes 200 162 200 761 $561 521 Arbor Daze 10 0 0 6 $6 530 Softball World 0 0 0 0 $0 531 Softball World Debt 0 0 0 0 $0 532 TSSC Reserve 400 2,244 400 4,784 $4,384 540 Golf Course 0 2 0 320 $320 541 Goif Course Debt 20 14 20 89 $69 542 Goif Course Reserve 950 2,614 950 3,966 $3,036 543 TSGC CIP Fund 0 28 0 660 $660 550 Parks At Texas Star 200 197 200 1,113 3913 552 Athletic Complex - GIP 0 360 0 6,423 $6,423 601 Equipment Replacement 3,000 4,792 3,000 10,854 $7,854 610 Health Insurance 10,000 12,768 8,000 15,334 $7,334 615 Risk Mgmtlworker's Comp 2,200 4,364 2,200 7,649 $5,449 Total 391,233 $167,650 385,458 $376,404 3290,946 Note that interest earnings are being earned on al[ investable City funds and great efforts are pursued to meet budgeted levels. This report points out that the unaudited interest earnings for the end of the fiscal year have exceeded the budgeted expectations due to slightly higher reinvestment rates. Several funds were budgeted conservatively or not at all due to the volatility of revenues and expenditures. However, these funds are used for investment purposes when available. These funds include Capital Improvement Projects, DEA Funds, Grant Funds, and Debt Service Funds. IV. COLLATERAL REVIEW The first and most important objective of investing public funds is safety. One way to ensure the safety of the City's assets is to have them fully secured with "collateral." Acceptable collateral is defined in the City's investment policy, but generally consists of types of securities in which the City would invest. Bank balances are monitored daily to assure full coverage. The amount of collateral required by the depository bank varies with the expected level of deposits (typically correlates with large receipts such as property taxes, franchise taxes and investment maturities). City of Euless Collateral Analysis for Cash & C.D. Investments as of 09130116 Pledging Safekeeping Pledged Sec. Institution Location Description Frost Bank Federal Reserve Bank Federal Reserve Bank Federal Reserve Bank Federal Reserve Bank Federal Reserve Bank Bank of Texas FDIC Produced By: Director of Finance Reviewed by. Assistant Director of Finance Security Par Value $3,044,302 US Treas Note 8/31/2019 $498,000 US Treas Note 813112019 $2,000,000 FHLMC 4/112018 $362,462 FHLMC 411/2018 $66,387 FHLMC 4/1/2018 $117,454 FDIC Market Value Inv. Value Difference (w/FDIC Ins.) A Maty (P & I) Over/(Under $3,364,323 Payroll Operating Insurance $664,517 $4,097 $363,893 $296,527 $2,699,806 $0 $250,000 $47,000 $203,000 C-Aaecbc1/2oa4,6t This review is practiced on a regular basis assuring coverage. Another regular practice is reviewing each individual instrument pledged, This assures compliance with the investment policy and consideration of the underlying security. This separate but thorough practice has protected the City's portfolio against derivative products. 13 V. BROKER SELECTION PROCESS This section of the report is to provide a brief explanation of the process undertaken to select brokers with which the City invests. The broker/dealer list is reviewed annually, and additions/deletions are made as necessary. The City currently maintains a list of six broker/dealers. The process is outlined below: 1. Brokers express an interest in doing business with the City's investment portfolio. 2. A questionnaire is sent to the broker which requests the necessary information for management to review including references, capital adequacy ratios, etc. 3. The Finance Department reviews all received questionnaires, summarizes the information and recommends the desired list of brokers with explanatory notes in conjunction with the first quarter investment report. 4. The list is presented to the investment committee annually for their approval. 5. All brokers are notified after the selection is complete. VI. SUMMARY The primary objectives of compliance, safety, liquidity and yield have been achieved for the reporting period as evidenced by this report. These objectives will continue to be pursued for the City of Euless as provided by the investment policy. This year proved to be another successful year for the investment program. The City of Euless, like all other local governments, is faced with the challenge of meeting benchmark levels triggered by the Fed's actions and meeting additional reporting requirements as stated by new legislation. Therefore, the City's investment program will continue to seek new techniques, instruments, etc. to enhance the return on the City's funds, as well as the return of all City funds. The investment committee will meet on January 10, 2017 to discuss the Annual Investment Report. Once the annual report is approved by the committee, it will be forwarded to the City Council. Janina Jewell Jackie Theriot Director of Finance Assistant Director of Finance 14 CERTIFICATION This report has been examined and approved by the Investment Officers of the City of Euless. Information presented in this report to the Investment Committee and City Council represents an accurate description of the City's investment activity for the fiscal year ending September 30, 2016. This report meets all requirements specified by the Public Funds Investment Act and the Policy of the City of Euless. Investment Officers Janina Jewell Director of Finance Jackie Theriot Assistant Director of Finance Diana L Ayala Budget and Treasury Manager -R 0-14_ a az-,cfo- Ross Fairclo Accountant II 15 Minutes — 9/13/2016 4 pm investment Committee Meeting Members: Linda Martin, Mayor Loretta Getchell, City Manager Bob Freeman, Deputy City Manager Janina Jewell, Director of Finance Committee members present included Mayor Martin, Loretta Getchell, Robert Freeman, and Janina Jewell. Non -committee present included Chris Barker, Assistant City Manager, and Diana Ayala, Budget / Treasury Manager. Jewell presented the Third Quarter Investment Report for Fiscal Year 2016. She stated it was in compliance with Chapter 2256 of the Public Funds Investment Act. Jewell referred the committee to page 2 that showed the City's investment strategy for the various funds of the City as of June 30, 2016. She noted that operating funds were invested with a weighted average maturity (WAM) ranging from 6 to 9 months, capital improvement projects (CIP) and special purpose funds were invested in accordance with drawdown schedules of the projects and would not exceed the estimated project completion dates, debt service funds were invested to assure adequate liquidity to cover the debt service obligations on the required payment date, and finally that emergency, contingency, operating and debt service reserve funds could not exceed five year investment timelines. Jewell stated that the presented investment portfolio was in compliance with those strategies for the third quarter of Fiscal Year 2016. Jewell also pointed out that no new funds were added during this quarter. Jewell then referred the committee to page 3 where she noted significant increases and decreases in fund investments since March 31, 2016. She specifically noted that the increase in fund 250 to the Glade Parks TIRZ was because the City portion of the TIRZ was transferred, that fund 509 Rate Stabilization fund increased almost $774K due mainly to the $800K settle -up from Trinity River Authority, that much of the $275K decrease in fund 532 was a transfer to fund 552 to fund project AC1601 the 60/90 Field at the Parks at Texas Star ($295K) and that the decrease of $552K in the Health Insurance fund is due to the high dollar amount of claims we had been discussing over the last couple of months. Overall there was a decrease of $5.3 million mostly due to normal operations including lots of CIP work over the spring and summer. The total market value of cash and investments was stated to be $83,968,479. On page 4 Jewell pointed out that the portfolio was very liquid with 58% being invested in pools and 42% in agencies. The portfolio shows its diversity in investment types on this page. She noted that the weighted average yield on the portfolio was 0.46% and was up 2 basis points from the last quarter and 11 basis points from the prior year which was 0.35%. On page 5 she noted the diversity of the portfolio by maturity and specifically cited that 87.8% of the portfolio maturity had a maturity of less than one year. The liquidity strategy was followed to meet cash flow requirements for construction projects, payroll, debt service, and other operating expenses. The WAM on the portfolio was 10343 days which is well within the 365 day guideline in the investment policy. 16 Page 6 highlighted the portfolio's diversity by institution. There was no more than a third of the portfolio with any one entity. She noted that TexStar did have the largest amount of the portfolio at 26.4% because this is where the City is holding much of the Midtown project. Three million was moved to longer term investments based on their estimated draw down schedule. Page 7 was noted to show the market value of the portfolio as of June 30, 2016, of $83,158,804 which, if investments had been liquidated, the City would have to show a gain of $37,498. On page 8 Jewell noted the comparison of average 90 day T -Bills for the quarter compared to the portfolio average maturity. The portfolio averaged 19 basis points over the 90 Day T-BiII benchmark due to the re -investment in higher yielding securities and a longer WAM than 90 days. This page also showed that cash was 99% invested for the quarter. Jewell noted on page 9 that the City was fully collateralized as of June 30, 2016. Page 10 was discussed as year-to-date earnings were above expectations at $221,135 since no interest earnings were budgeted last year for Midtown and it was now earning interest. Projections for earnings to end the year were estimate up $170K. Jewell then noted that the report was certified by City Investment Officers. The Mayor made a motion to approve the third quarter's investment report. Mr. Freeman seconded the motion and the vote was unanimous. Minutes for the June 27, 2016, Investment Committee Meeting were presented. Ms. Getchell motioned to approve. Mayor Martin seconded the motion and the committee approved unanimously. Jewell then noted the Federal Reserve Board's meeting was the next week and that no one really expects a change in the Federal Funds Reserve Rate. The committee discussed that they did not expect to see any change until maybe December after the Presidential elections in November. At 4:14 pm Mr. Freeman motioned for adjournment and the committee unanimously approved. 17 APPENDICES APPENDIX A 19 City of Euless Change in Portfolio Values by Asset and Investment Fund For the Quarter Ending September 30, 2036 Inv. Type CUSIP Number Maturity/ Call Date Far Value Market Value 09/30/2016 Market Value 06/30/2016 Change io Market Value Book Value 09/31/2016 Baok Value 06/30/2016 Change in Book Value OPERATING FUNDS: j FFCB 3133EEDQO 12/01/2016 500,000 500,265 500,168 98 500,000 500,000 - FHLB 3130A3M43 12/23/2016 1,000,000 1,000,810 1,000,528 282 997,300 997,300 - FBB 3130A56G9 02/24/2017 500,000 500,313 500,128 185 500,000 500,000 - F1-IL.13 3130A5CH0 11/30/2016 500,000 500,300 500,105 196 500,000 500,000 - F}1LB 3130A4F72 02124/2014 750,000 750,851 750,821 30 750,795 750,795 - FHLB 3130A4ZF2 04/20/2017 500,000 500,260 500,219 42 499,355 499,355 - FFCB 3133EE6A3 02/06,2017 1,000,000 1,000,648 1,000,355 293 1,000,000 1,000,000 - FFCB 3133EFEU7 08/28/2017 1,000,000 1,001,190 1,002,033 (843) 1,001,526 1,001,942 (416) FFE,MC 3134071125 10/27/2017 1,000,000 1,000,010 1,000,188 (178) 1,000,000 1,000,000 - FHLB 3130A6RF6 12/05/2016 1,000,000 1,000,600 1,000,003 597 1,000,000 1,000,000 - FFCB 3133F.FNE3 11/06/2017 1,000,000 1,000,370 1,001,559 (1,189) 994,968 994,720 248 FHLMC 3134G62A0 06/16/2017 1,000,000 1,002,052 1,002,621 (569) 997,600 997,600 - FHLMC 3134G64W0 06/23/2017 1,000,000 1,002,072 1,002,918 (846) 998,200 998,200 - FHLB 3130A6UK1 12/29)2017 1,000,000 1,001,550 1,002,894 (1,344) 1,000,000 1,000,000 - FEU..MC 3137EADT3 01/15/2016 1,000,000 1,001,753 1,002,204 (451) 1,000,538 1,000,942 (404) FHLMC 313408X61 10/27/2017 815,000 815,057 815,342 (285) 815,000 815,000 - FHLB 3130A86D0 11/25/2016 1,000,000 1,000,300 1,000,000 300 1,000,000 1,000,000 - Purchases FFCB 3133E0KR5 10/06/2017 1,000,000 1,000,200 - 1,000,200 1,000,000 - 1,000,000 FHLMC 3134G9VV6 01/12/2018 1,000,000 1,000,000 - 1,000,000 1,000,000 - 1,000,000 FFCB 3133E06P4 12/20/2017 500,000 499,750 - 499,750 499,970 - 499,970 FHLB 3130A8W82 10/27/2017 735,000 735,000 - 735,000 734,449 - 734,449 FHLB 3130A5EP0 05/30/2017 590,000 590,244 - 590,244 590,077 - 590,077 Maturities FHLB 3130A3P32 07/01/2016 1,000,000 - 1,000,000 (1,000,000) - 1,000,470 (1,000,470) FHLB 3130A45N8 08/09/2016 500,000 - 500,029 (500,029) - 500,000 (500,000) FFCB 3133EEND8 09/16/2015 1,000,000 - 1,000,010 (1,000,010) - 1,000,000 (1,000,000) FFCB 3133FES7A 07/12!2016 500,000 - 500,050 (500,050) - 500,000 (500,000) FFCB 3133EETK6 08/16/2016 500,000 - 500,097 (500,097) - 500,000 (500,000) FAMCA 31315PA25 07/27/2016 500,000 - 500,586 (500,586) - 500,389 (500,389) FHLB 3130A52X0 07122/2016 500,000 - 500,000 (500,000) - 500,000 (500,000) FFCB 3133EFBT3 09/01/2016 1,000,000 - 1,000,026 (1,000,026) - 1,000,000 (1,000,000) FHLMC 313407M81 07/06/2016 500,000 - 500,022 (500,022) - 498,875 (498,875) FHLB 3130A7AF2 02/05/2016 1,000,000 - 1,000,140 (1,000,140) - 1,000,000 (1,000,000) FHLB 3130A7D77 02/22/2016 500,000 - 500,054 (500,054) - 500,000 (500,000) FHLB 3130A77E6 03/14/2016 1,000,000 1,000,193 (1,000,193) - 1,000,000 (1,000,000) Par total does not Total Operating: include maturities $ 18,390,000 $ 18,403,595 $ 23,083.290 $ (4,679,695) $ 18,379,777 $ 23,055,587 $ (4,675,811) 19 APPENDIX A Cite of Euless Change in Portfolio Values by Asset and Investment Fund For the Quarter Ending September 30. 2016 Inv, CUSIP Type Number Maturity/ Call Date Par Value Market Valae 09/30/2016 Market Value 06/30/2016 Change in Market Value Book Value 09/30/2016 Book Value 06/30120I6 Change in Book Value IP FENDS FHLB 3130A4FR8 03/02/2017 500,000 500,860 500,700 161 499,340 499,340 - FFCB 31331YP95 10/16/2016 150,000 150,285 I51,794 (1,509) 150,000 151,509 (1,509) FHLB 3130A3NM2 12/30/2016 1,000,000 1,000,840 1,000,674 166 1,000,285 1,000,570 (285) FFCB 3133EFKM8 10/20/2017 1,000,000 1,000,250 999,809 441 1,000,000 1,000,000 - F1ELMC 3134082C2 10/27/2017 1,250,000 1,250,238 1,250,655 (418) 1,249,063 1,249,063 - FHLB 313379DD8 06/21/2017 1,000,000 1,002,985 1,003,869 (884) 1,001,009 1,001,366 (357) FHLB 3130A3J70 11/23/2016 1,000,000 1,000,470 1,000,534 (64) 1,000,720 1,000,720 - FHLB 3130A8KK8 12/22/2016 1,000,000 1,000,298 999,838 460 999,880 999,880 - FHLMC 3137EAD1J0 purchases 01/27/2017 1,000,000 1,000,310 999,890 420 999,670 999,670 - None - - - - _ Maturities None - - - - - - Par tom! does net Total CIP: include maturities $ 7,900,000 8 7,906,536 $ 7,907,762 8 (1,227) $ 7,899,966 8 7,902,117 8 (2,151) RESERVE FUNDS; Fi1LMC 313405RS6 11/28/2016 500,000 500,295 500,205 90 501,195 501,195 - FFCB 31331JX32 10/28/2016 500,000 500,525 501,987 (1,462) 500,499 501,995 (1,496) FFCB 31331J2M4 11/22/2016 200,000 200,450 201,083 (633) 200,236 200,944 (708) FHLMC 3134G6049 05/08/2017 1,000,000 1,001,970 1,002,376 (406) 1,000,640 1,000,640 - FHLB 3130A5VE6 10/13/2017 500,000 500,080 500,806 (727) 500,000 500,000 - FFCB 3133EE5T3 08/03/2017 500,000 500,590 500,902 (312) 500,000 500,000 - Purchases B of T - C 978208 -AB -2 09/29/2017 47,000 47,000 - 47,000 47,000 - 47,000 Maturities CD 78658Q -VG -5 03/31/2016 170,000 - 169,940 (169,940) - 170,000 (170,000) FNMA 3136FPJQI 09/21/2016 117,000 - 117,436 (117,436) - 117,334 (117,334) FFCB 3133EE053 08/04/2017 500,000 - _ 500,026 (500,026) - 498,500 (498,500) Paz total dela an Total Reserve: include mammies $ 3,247,000 $ 3,250,910 $ 3,994,759 8 (743,850) 5 3,249,570 $ 3,990,609 8 (741,039) , QVgRhi11XHT INVESTMENTS: Beginning Bal Ending Bal Texpool Balance 19,958,157 21,750,451 21,750,451 19,958,157 1,792,294 21,750,451 19,958,157 1,792,294 Purchases 5,310,639 Maturities 3,518,345 Texstar Balance 21,974,556 27,548,655 27,548,655 21,974,556 5,574,099 27,548,655 21,974,556 5,574,099 Purchases 10,834,070 Maturities 5,259,971 BofTEscrolBalance 6,240,278 4,265,269 4,265,269 6,240,278 (1,975,009) 4,265,269 6,240,278 (1,975,009) Purchases 3,437 Maturities 1,978,446 Total Overnight: _ $ 53,564,376 $ 53,564,375 $ 48,172,992 5 5,391,384 $ 53,564,375 $ 48,172,992 5 5,391,384 Par total dots not Total Portfolio )elude mataaiues S 83,101,376 $ 83,125,4I5 8 83,158,884 8 (33,388) $ 83,093,689 8 83,121,306 $ (27,6 20 APPENDIX B City of Euless Schedule of Purchases FY2016 4th Quarter Cost Accrued inv. CUSIP Purchase Maturity Call Term Price Par Book Value Coupon Interest Seller Total Cost Type Number Date Date Date (in days) Per $100 Value (Prin. Only) YTM Rate Purchased Inst, Discount Premium Fund of Investment Texpool July $ 1,041,250 $ 1,041,250 Various $ 1,041,250 Texpool August 2,208,366 2,208,366 Various 2,208,366 Texpool September 2,041,250 2,041,250 Various 2,041,250 Texstar July 1,803,782 1,803,782 Various 1,803,782 Texstar August 2,903,044 2,903,044 Various 2,903,044 Texstar September 6,103,146 6,103,146 Various 6,103,146 B of T Escrow SIT Cash Fund - B of T - - 502 FFCB 3133EGKR5 07/06(16 10/06/17 10106/16 450 100.0000 1,000,000 1,000,000 0.63% 0.625% 0 Coastal 501 1,000,000 FHLMC 3134G91/06 07/12/16 01/12118 10/12116 540 100.0000 1,000,000 1,000,000 0.85% 0.85096 0 Coastal - 101 1,000,000 FFCB 3133EGGP4 08/04/16 12/20/17 NIC 496 99.9980 500,000 499,990 0.7014 0.700% 428 Duncan (10.00) 615 500,418 FHLB 3130A8W82 08/24/16 10/27/17 N/C 423 99.9750 735,000 734,816 0,69% 0.670% 369 Mutual (183.75) - 101 735,186 FHLB 3130A5EP0 09/19/16 05/30/17 N/C 251 100,0130 590,000 590,077 0.6135 0,62595 1,116 Samoa - 76.70 101 591,193 B of T - CO 978208 -AB -2 09/30/16 09129/17 N/C 359 100.0000 47,000 47,000 0.7596 0,75014 0 B of T - CD - 211 47,000 Totals $ 19,972,837 $ 19,972,720 0.70% $ 1,914 $ (194) $ 77 $ 19,974,634 B of T Escrow Dividends Reinvested July 1,237 1,237 - BofT - 502 1,237 August 1,156 1,156 9 of T - - 502 5,156 September 1,044 1,044 - B of T - 502 1,044 Texpool Dividends Reinvested Jul, 6,215 6.215 - Texpool - - Various 6.215 August 6,680 6,680 - Texpool - - Various 6,680 September 6,878 6,878 Texpool - Various 6,878 Texstar Dividends Reinvested July 7,618 7,618 - Texstar - - Various 7,618 August 7,778 7,778 Texstar - Various 7,778 September 8,704 8,704 Texstar - Various 8,704 Totals including Dividends $ 20,020,147 $ 20,020,030 $ 1,914 $ (194) $ 77 $ 20,021,943 21 APPENDIX C City of Euless Schedule of Maturities FY2016 4th Quarter Term to Cost Accrued Inv. CUSIP Purchase Maturity Call Maty Price Par Book Value Yield To Coupon Interest Seller Total Cost Type Number Date Date _ Date On days) Per $100 Value (Prin. Only) Maturity Rate Purchased Inst. Discount Premium Fund of Investment Texpool July $ 301,229 $ 301,229 $ - $ - $ - Various $ 301,229 Texpool August 817,116 817,116 - Various $ 817,116 Texpool September 2,400,000 2,400,000 - Various $ 2,400,000 Texstar July 603,782 603,782 - - - Various $ 603,782 Texstar August 2,903,04.4 2,903,044 - - Various $ 2,903,044 Texstar September 1,753,145 1,753,145 - - Various $ 1,753,145 B of T Escrow July 138,148 138,148 502 5 138,148 B of T Escrow August 115,035 115,035 502 $ 115,035 0 of T Escrow September 1,725,914 1,725,914 502 $ 1,725,914 FHLB 3130A3P32 12/05/14 07101(16 N/C 566 100,0470 1,000,000 1,000,470 0.40% 0.430% Samco 469,98 101 $ 1,000,940 FHLMC 3134G7M81 01/21(16 10106/17 7106116 Qtrly 615 99,9250 500,000 499,625 0.92% 0.67596 1,276.04 Coastal (375.00) 101 $ 500,526 FFCB 3133EESZ4 03/12/15 07(12/16 NIC 480 100,0000 500,000 500,000 0.46% 0.46096 383.33 Mutual 615 $ 500,383 FHLB 3130A62X0 07127(15 07/22/16 NIC 355 100.0000 500,000 500,000 0,3896 0.375% 26.04 Hilltop - 101 $ 500,026 FAMCA 31315PA25 07110/15 07/27/16 NIC 377 101.7230 500,000 508,615 0.35% 2.000% 4,527.78 Mutual - 8,615.00 240 $ 521,758 FHLB 3130A45N8 02109/15 08/09/16 NIC 540 100.0000 500,000 500,000 0.45% 0.450% - Duncan - 501 $ 500,000 FFCB 3133EETK6 03/16/15 08/16/16 N/C 510 100.0000 500,000 500,000 0.55% 0,550% 229.17 Mutual - 615 $ 500,229 FHLB 3130A7AF2 02/05/16 08/19/16 N/C 194 100.0000 1,000,000 1,000,000 0.50% 0.50096 Hilltop - 101 $ 1,000,000 FHLB 3130A7D77 02/22/16 08,122/16 NIC 180 100.0000 500,000 500,000 0.47% 0.470% Vining - 501 $ 500,000 FFCB 3133EEG53 05/07(15 08/04/17 08/24/16 807 99,9000 500,000 499,500 0.85% 0,800% - Samco (500.00) 501 5 499,000 FFCB 3133EFBT3 09/01/15 09/01/16 NIC 360 100.0000 1,000,000 1,000,000 0,4296 0.420% Coastal 610 $ 1,000,000 FFCB 3133EEND8 02/06/15 09/06/16 N/C 570 100.0000 1,000,000 1,000,000 0.42% 0.420% - Duncan - 101 $ 1,000,000 FHLB 3130A7JE6 03/14/16 09/14/16 N/C 180 100,0000 1,000,000 1,000,000 0.52% 0.520% Hilltop - 101 $ 1,000,000 FNMA 3136FPJQ1 05/15/15 09/21/16 N/C 485 102,2860 117,000 119,675 0.4296 2.125% 372.94 Samco 2,674.62 542 $ 122.722 B of T - CD 78658Q -VG -5 03/31/16 09/30/16 N/C 180 100.0012 170,000 170,000 0.45% 0.450% 2.10 B of T - CD - 211 $ 170,002 TOTAL $ 20,044,412 $ 20,055,297 0.50% 22 6,817.40 1875.00) 11,759.60 5 20,072,999 APPENDIX D City of Euless Investment Portfolio General Information Investment Types and Institutions Investment Types Texstar Local Gov't Pool Texpool Local Gov't Pool B of T Bank of Texas FNMA FFCB FHLB institution Fed. Nat'l Mort. Assoc. Fed. Farm Credit Bank Fed. Home Loan Bank FHLMC FAMCA CD TBILL Fed. Home Loan Mort. Corp Farmers Mac Certificates of Deposit Treasury Bill Texstar TexSTAR Texpool TexPool B of T Bank of Texas Vining Coastal Samco Vining Sparks Coastal Securities Samco Capital Mutual Mutual Securities Hilltop Hilltop Securities Duncan Duncan VVilliams Broker/Dealer Review and Approval The City maintains a list of six brokers. Currently it includes Coastal Securities, Duncan Williams, Hilltop Securities, Mutual Securities, Samco Capital, and Vining Sparks. Staff does not recommend any additions or deletions at this time. The public funds investment act and the City's investment policy require staff to review the broker/dealer list annually. At this time, it is recommend that the committee approve the following list of broker dealers. The recommended broker/dealer list for 2017 includes: Coastal Securities - Tony Sekaly/Zach Brewer Duncan Williams - Doug Boyer/Patrick Boyer Hilltop Securities - Linda Callaway Mutual Securities Inc. - Michael Swan Samco Capital Markets - Robert Phillips Vining Sparks - Mike Smith 24 Economic News