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FY 2014 Annual Investment Report
CH EULESS ANNT JAANA H I 1'ESTM 1V ? ..\\ POR? IFIISCAIL YEAR 2013-2014 I E 6 '+� z kit i' I �. Ali �I i 20 1. N. atm- Dive &dew, TD 76039 Y w0 iuast'xoggv INVESTMENT COMMITTEE MEETING 01/13/15 *Annual Review, FY14 Introduction Investment Strategy Compliance I. Portfolio Summary 11. Performance Summary 111. Interest Income Summary IV. Collateral Review V. Broker Selection Process VI. Summary *Appendices Appendix A - Changes in Portfolio Values by Asset Appendix B - Investment Portfolio by Type of Asset Appendix C - Investment Portfolio by Fund Appendix D - Investment Purchases Appendix E - Investment Maturities Appendix F - Investment Maturities by Fund at September 30, 2014 *Economic News *Investment Policy *General Discussion and Questions 1 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 2013-14. 2 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 (See Appendix E). 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 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 (See Appendix E). 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 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 552 TSSC CIP Fund 720 Glade Parks Escrow Phase II Fund 725 Glade Parks Escrow Phase III Fund 730 Glade Parks Escrow Phase IV 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 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 (see Appendix E). 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) 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. ninct 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, 2014, is summarized by instrument as shown below. Distribution by Instrument of Average Avg. Yield Instrument $ Cost Portfolio Yield Prior Qtr. Agencies $ 35,690,000 55.87% 0.15% 0.11% Investment Pools $ 28,194,476 44.13% 0.01% 0.01% $ 63,884,476 100.00% The Distribution by Instrument table shows that the majority of City funds, approximately 56% are invested in government agencies, while the remaining 44% is invested in local government investment pools. As of the date of this report, the weighted average yield on the portfolio was 0.16%. 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. FHLB 27% Portfolio Composition as of September 30, 2014 FNMA 2% FAMCA _ 2% _ FHLMC 1% Texpool 21% Texstar 23% 4 I. PORTFOLIO SUMMARY (CONTINUED) The City's investment portfolio at the end of the fiscal year, September 30, 2014, is summarized by maturity as shown below. Distribution by Maturity # of months $ Cost Overnight $ 28,194,476 < 1 mo $ 2,999,835 up to 6 mos $ 10,319,519 6 to 9 mos $ 9,225,526 9 to 12 mos $ 2,500,224 12 to 18 mos $ 8,744,896 18 to 24 mos $ 1,000,000 > 24 mos $ 900,000 $ 63,884,476 of Portfolio 44.1 4.7% 16.2% 14.4% 3.9% 13.7% 1.6% 1.4% 100.0% The Distribution by Maturity table reflects the degree of liquidity in the City's portfolio. Currently, access to 44% of the portfolio is available within 24 hours, with an additional 21% 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 18% of the portfolio matures within one year. Currently, the City has 14% of the portfolio invested between 12 - 18 months, 2% of the portfolio invested between 18 - 24 months, and an additional 1% beyond 24 months to take advantage of yields in this area of the curve. The weighted average maturity on the portfolio is currently 152.76 days. Investment Maturity Distribution as of September 30, 2014 > 24 mos 1 1 $0.9 18 to 24 mos 1 $1.0 12 to 18 mos 9 to 12 mos 6 to 9 mos up to 6 mos < 1 mo Overnight $2.5 L $8.7 $9.2 Pr - $3.0 $10.3 $28.2 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 Shown in millions 5 I. PORTFOLIO SUMMARY (CONTINUED) The City's investment portfolio at the end of the fiscal year, September 30, 2014, is summarized by institution as shown below. Institution Cantor Fitzgerald Coastal Securities Duncan Williams First Southwest Mutual Securities Samco Capital Vining Sparks Texpool TexStar B of TX Distribution by Institution $ Cost $ 2,504,842 $ 9,499,252 $ 3,542,655 $ 6,998,475 $ 5,499,630 $ 4,745,146 $ 2,000,000 $ 13,160,618 $ 15,027,054 $ 906,804 % of Portfolio 4.0% 14.9% 5.5% 11.0% 8.6% 7.4% 3.1% 20.6% 23.5% 1.4% $ 63,884,476 100.1% The City strives to not only diversify the portfolio by the type of instruments that are purchased, but also by the institution in which they are purchased from. 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. Investments by Institution as of September 30, 2014 B of TX $0.9 Texstar Texpool $12.8 Vining $2.8 Samco Mutual FSW Duncan Coastal Cantor $5.0 r$ $7.5 $8.5 1.3 $10.0 $12.2 $0.0 $4.0 $8.0 $12.0 Shown in millions $16.0 $20.0 6 City of Euless Pooled Portfolio Summary for Quarter Ending September 30, 2014 Cost Book Market Principal Only Value Value Investments at June 30, 2014 $ 67,979,508 $ 67,955,390 $ 67,971,968 Investment Purchases/Dividends $ 17,908,001 Investment Maturities $ (22,003,033) Investments at September 30, 2014 $ 63,884,476 $ 63,853,263 $ 63,832,280 Janina Jewell Director of Finance JLI,Q,02iLb Jackie Theriot Assistant Director of Finance Summary of Investments by Fund The following is a summary of cash and investments held by each fund at June 30, 2014 and September 30, 2014. The changes include all investment purchases, maturities, revenues, expenses, and transfers that occurred during the fourth quarter of FY2014. 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 245 Glade Parks PID 250 Glade Parks TIRZ #3 260 Cable PEG Fund 301 Developer's Escrow Fund 305 Streets CIP 310 1/2 Cent Sales Tax CIP 320 General CIP Fund 321 Redevelopment CIP Fund 325 Police Facility CIP 330 Car Rental CIP Fund 401 Debt Service/General 402 Star Center Debt Service 403 Glade Parks Debt Service 410 EDC Debt Service 501 Water & Wastewater Fund 502 Water & Wastewater-CIP 503 Water & Wastewater Bond ResE 504 Service Center Fund 505 Water Impact Fees 506 Water & Wastewater -Debt Servi 507 Water & Wastewater -Emergent 508 Wastewater Impact Fees 509 W/WW 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 550 Parks @ Texas Star 552 Parks @ Texas Star CIP 601 Equipment Replacement 610 Health Insurance Fund 615 Risk Management Fund 701 Payroll Clearing Fund 705 Star Center Escrow 720 Glade Park Phase II Escrow 725 Glade Park Phase III Escrow 730 Glade Park Phase IV Escrow Cash & Investment Cash & Investment Increase/ at Market Value at Market Value Decrease 6/30/2014 9/30/2014 In Fund 12, 398, 712.46 10,139 , 961.46 500,241.85 500,410.00 500,078.95 500,000.00 185, 251.43 163, 294.15 163, 241.75 170,976.36 1, 727, 631.57 1,752,802.89 912,978.15 904,824.00 413,151.10 349,708.06 882,774.39 936,582.08 14,570.54 14,570.55 111,263.81 121,933.84 10.91 3,543.25 69,203.64 8,403,969.15 11,532,066.21 718, 449.91 656, 755.90 44,560.14 2,415.66 336, 443.51 370,472.16 1,525,047.37 1,518,874.93 1,509,516.37 1,161,418.44 1,014,575.95 998,210.97 800,141.38 769,841.58 67,731.24 67,737.00 77,545.29 77,551.41 494,795.92 580,695.51 1,611,259.50 662,367.81 568, 305.20 134, 438.42 0.30 1,995.30 3,790,372.53 5,145,705.51 1,355,332.98 2,448,064.73 2,149,996.25 (298,068.48) 305,153.01 305,179.63 26.62 1,900.10 (57,495.60) (59,395.70) 1,350,304.50 1,210,748.37 (139,556.13) 348,662.16 12,578.53 (336,083.63) 500,000.00 500,014.49 14.49 667,247.15 666,104.69 (1,142.46) 2,239,625.94 2,169,675.95 (69,949.99) 354,765.06 298,365.18 (56,399.88) 1,233,054.96 1,038,428.12 (194,626.84) 363,103.41 314,145.02 27,219.81 27,097.42 (302,149.68) (278,697.55) (26,769.30) 8,008.70 974,740.01 1,010,390.15 11,629.86 93,448.39 (10,357.80) 54,402.71 1,962,324.80 1,118,637.42 338,252.73 362,408.73 753,045.27 753,105.76 2,395,525.42 2,562,726.87 3,153,497.80 2,905,894.23 1,854,058.99 2,031,858.95 520,124.05 1,420,649.01 1,420,666.41 2,148,647.81 (1,866,379.93) Capital outlay 1,439,788.19 (198,586.63) Capital outlay (2,258,751.00) Operating expenses 168.15 (78.95) (21,957.28) 7,734.61 25,171.32 (8,154.15) (63,443.04) Operating expenses 53,807.69 Seized funds 0.01 10,670.03 10.91 3,543.25 69,203.64 3,128,097.06 Operating Revenues (61,694.01) Transfer to Debt (42,144.48) Transfer to Debt 34,028.65 Cable Franchise PEG Fees (6,172.44) (348,097.93) Capital outlay (16,364.98) Capital outlay (30,299.80) Capital outlay 5.76 6.12 85,899.59 (948,891.69) Debt service payments (433,866.78) Debt service payments 0.30 1,995.30 4,015,027.74 1,638,374.82 Operating revenue Capital outlay Operating expenses TRA water pmt/debt pmt Debt service payments TRA WW pmt/debt pmts Transfer to W/WW operations Operating expenses Capital outlay (48,958.39) Operating expenses (122.39) 23,452.13 Operating revenues 34,778.00 Transfer from operating 35,650.14 Gas royalty payments 81,818.53 Transfer from Reserve/op revs 64,760.51 Transfer from operating (843,687.38) Proj exps/transfer to operations 24,156.00 60.49 167,201.45 Transfer from other funds (247,603.57) Insurance claims 177,799.96 Transfer from other funds 520,124.05 EOY balance will clear next mo 17.40 TOTAL 66,789,559.96 64,094,617.17 (2,694,942.79) 8 II. PERFORMANCE SUMMARY Cash and Investments Balances -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 FY2014. The monthly data below shows the continued utilization of City funds through investments. Consolidated Invested Percentage FY2013 Cash Balance Invested October $ (1,045,701) $ 64,157,930 November $ (238,976) $ 64,921,362 December $ 2,004,279 $ 68,001,451 January $ 1,222,208 $ 71,764,660 February $ (791,791) $ 73,911,243 March $ 159,410 $ 63,124,139 April $ 423,498 $ 63,026,697 May $ 230,971 $ 62,562,590 June $ 338,998 $ 63,623,480 July $ 440,639 $ 63,083,427 August $ 461,983 $ 64,667,172 September $ 371,050 $ 64,003,860 Average $ 298,047 $ 65,570,668 102% 100% 97% 98% 101% 100% 99% 100% 99% 99% 99% 99% 100% Consolidated Invested Percentage FY2014 Cash Balance Invested October $ 353,570 $ 69,213,957 99% November $ (467,867) $ 68,498,400 101% December $ (345,724) $ 71,609,800 100% January $ 1,260,771 $ 75,584,854 98% February $ (551,590) $ 76,743,544 101% March $ 385,338 $ 65,604,049 99% April $ 497,660 $ 66,134,052 May $ 695,516 $ 68,811,877 99% June $ 185,368 $ 67,997,489 100% July $ 513,369 $ 66,460,866 August $ 157,817 $ 65,102,085 September $ 143,581 $ 63,897,098 Average $ 235,651 $ 68,804,839 99% 99% 100% 100% 100% This graph shows how a greater portion of the City's funds continue to be invested, always in pursuit of 100%. Percent Invested 105.00% 100.00% 95.00% 90.00% 85.00% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fiscal Year 9 Cash management performance - effectiveness of the cash management program has been measured utilizing actual figures for FY2014 as shown below: Average City's Number Estimated 90 -day Invested Days in Interest Month T-bill Yield Balance Month Earnings October 0.04% $ 69,213,957 31 $2,351 November 0.06% $ 68,498,400 30 $3,378 December 0.08% $ 71,609,800 31 $4,866 January 0.02% $ 75,584,854 31 $1,284 February 0.05% $ 76,743,544 28 $2,944 March 0.05% $ 65,604,049 31 $2,786 April 0.03% $ 66,134,052 30 $1,631 May 0.04% $ 68,811,877 31 $2,338 June 0.04% $ 67,997,489 30 $2,236 July 0.03% $ 66,460,866 31 $1,693 August 0.03% $ 65,102,085 31 $1,659 September 0.02% $ 63,897,098 30 $1,050 Average 0.04% $ 68,804,839 $2,351 Estimated earnings at benchmark yields: $28,215 Actual FY2014 interest income (un -audited) $104,437 Earnings over benchmark: $76,222 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 90 -day City's Avg. Month T-bill yield Portfolio Yld Difference October 0.04% 0.25% 0.21% November 0.06% 0.24% 0.18% December 0.08% 0.24% 0.16% January 0.02% 0.15% 0.13% February 0.05% 0.14% 0.09% March 0.05% 0.15% 0.10% April 0.03% 0.15% 0.12% May 0.04% 0.14% 0.10% June 0.04% 0.12% 0.08% July 0.03% 0.14% 0.11% August 0.03% 0.15% 0.12% September 0.02% 0.16% 0.14% Average 0.04% 0.17% 0.13% During FY2014, the Federal Reserve left rates unchanged. The Federal Open Market Committee has kept the target fed funds rate between 0.00% and 0.25% throughout the year and currently anticipates economic conditions are likely to warrant exceptionally low levels for the fed funds rate at least through mid -2015. The average yield on the City's portfolio has dropped slightly from month-to-month throughout the year. However, the City's portfolio continues to surpass the benchmark 90 -day T-bill rate by an average of 13 basis points for the year. 10 Interest Income Summary' III. INTEREST INCOME SUMMARY FY10 Audit FY11 Audit FY12 Audit FY13 Audit FY14 Unaudited FY14 Budgeted $380,555 $235,087 $193,366 $146,562 $104,437 $166,892 Interest Earnings $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 FY10 Audit FY11 Audit FY12 Audit FY13 Audit FY14 FY14 Budgeted Unaudited Interest income did not meet the budgeted level for fiscal year 2014. When compared to prior year, interest earnings have decreased. This decrease can be attributed to the reinvestment of proceeds from maturing securities into lower yield investments. 11 Interest Income By Fund For Fiscal Year Ending September 2014 # Fund FY 13 Actual FY 14 FY 14 Actual Diff FY14 Audited Budget (Unaudited) Bud. -Act. 101 General $40,710 $61,725 $26,601 ($35,124) 201 Hotel/Motel 114 120 41 ($79) 202 Juvenile Case Fund 73 0 27 $27 210 Half Cent Sales Tax -Operation; 1,128 1,300 2,021 $721 211 Half Cent Sales Tax -Reserve 9,001 6,500 9,219 $2,719 220 Crime Control Prevention District 178 160 110 ($50) 221 Police Seized Asset Funds 116 0 338 $338 230 Euless DEA Fund 6 500 0 ($500) 231 Police DEA State Awards 118 500 32 ($468) 240 Car Rental 18,030 21,935 8,577 ($13,358) 245 Glade Parks PID 0 0 0 $0 250 Glade Parks TIRZ 0 0 0 $0 260 Cable PEG Fund 0 0 0 $0 301 Developer's Escrow 2,331 1,000 3,137 $2,137 305 Streets CIP 3,637 0 2,229 $2,229 310 Half Cent Sales Tax - CIP 4,149 2,500 1,987 ($513) 320 G.O. CIP 2,139 2,500 242 ($2,258) 321 Redevelopment CIP Fund 251 345 36 ($309) 325 Police Facility CIP 91 167 26 ($141) 330 Car Rental CIP 8,621 0 2,740 $2,740 401 GO Debt Service 1,091 1,000 406 ($594) 402 Star Centre Debt 334 350 110 ($240) 501 Water and Wastewater 15,810 30,000 11,095 ($18,905) 502 Water and Wastewater CIP 9,229 7,000 8,126 $1,126 503 Water and Wastewater Reserve 298 0 108 $108 504 Service Center Fund 0 0 0 $0 505 Water Impact Fees 3,252 5,000 4,257 ($743) 508 Wastewater Impact Fees 518 1,000 165 ($835) 509 W/WW Rate Stabilization 5,043 5,000 4,701 ($299) 510 Drainage 153 500 92 ($408) 511 Drainage CIP 2,018 0 2,737 $2,737 520 Recreation Classes 389 500 108 ($392) 521 Arbor Daze 20 0 4 $4 530 Softball World 0 0 0 $0 531 Softball World Debt 0 0 0 $0 532 TSSC Reserve 753 1,000 314 ($686) 540 Golf Course 38 190 3 ($187) 541 Golf Course Debt 22 0 12 $12 542 Golf Course Reserve 1,614 1,200 1,997 $797 550 Parks At Texas Star 179 200 95 ($105) 552 Athletic Complex - CIP 705 500 249 ($251) 601 Equipment Replacement 5,535 3,000 3,369 $369 610 Health Insurance 7,383 10,000 6,819 ($3,181) 615 Risk Mgmt./Worker's Comp 1,485 1,200 2,306 $1,106 Total $146,562 $166,892 $104,437 ($62,455) Note that interest earnings are being earned on all investable City funds and great efforts are pursued to meet budgeted levels. This report points out that the un -audited interest earnings for the end of the fiscal year did not meet budgeted expectations due to unprecedented market lows. 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. 12 IV. COLLATERAL REVIEW The first and most important objective of investing public funds is safety. One way to insure 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 09/30/14 Pledging Safekeeping Pledged Sec. Security Market Value Inv. Value Difference Institution Location Description Par Value (w/FDIC Ins.) (a7 Mat'v (P & I) Over/(Under) Frost Bank Federal Reserve $3,294,058 $2,448,092 $462,182 $1,985,910 Bank FHLMC Payroll $22,458 4/1/2018 $3,294,058 Operating $249,489 Insurance $190,235 Produced By: Director of Finance Reviewed by: Assistant Director of Finance This review is practiced on a regular basis assuring coverage. Another regular practice is reviewing each individual instrument purchased. 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 seven 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 13, 2015 to discuss the Annual Investment Report. Once the annual report is approved by the committee, it will be forwarded to the City Council. ,,,e‘4,t4LAAeza 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, 2014. This report meets all requirements specified by the Public Funds Investment Act and the Policy of the City of Euless. Investment Officers 1;4f-e-otet.g.de-4,d, Janina Jewell Director of Finance 411 d Jackie Theriot Assistant Director of Finance 15 Minutes —1/14/2014 Investment Committee Meeting Members: Mary Lib Saleh, Mayor Gary McKamie, City Manager Loretta Getchell, Deputy City Manager Janina Jewell, Director of Finance All committee members were present as well as non -committee member Chris Barker. Meeting was called to order to review the annual investment report for FY2013 at 3:31 pm. Janina Jewell presented the report for fiscal year ended September 30, 2013. She reported that per the Investment Policy a strategy has been defined for each fund as shown on Page 3. The portfolio summary on page 4 provided a breakdown of the total investments by instrument type. The City's portfolio was very liquid with 39% of the portfolio being maintained in local government investment pools. The remaining 61% is invested in government agencies. A further breakdown by maturity on page 5 showed that 39% of the City's portfolio was available overnight with an additional 14% available within 6 months, and an additional 16% available and maturing within 1 year. The remaining over 31% had been invested beyond one year to take advantage of higher yields. Those investments consist primarily of emergency, contingency, and reserve funds. The overall WAM of the portfolio was 237.07 days, which was well within the 365 -day guideline prescribed by the policy. At the last meeting the WAM was 257.25 days. The committee asked for that to be calculated on expected call date of investments and that came to 180.16 days. Staff did say that they were instructed after the spring meeting to go up to 2 years, but again the minutes did not reflect those comments. Page 6 included a comparison that shows the portfolio broken down by the institution with whom it is invested. Not only does the City diversify investments by type of investment and maturity date, but also diversify by institution. A comparison of book value to market value was shown on page 7. Although the City policy is to hold all investments to maturity, if the entire portfolio were to have been liquidated, we would have had a gain of almost $7,700. This page also reflects purchases and dividends reinvested during the quarter of approx. 20.4 million, and maturities during the period of 20 million, which is detailed in the Appendix D and E of the report. Page 9 showed the invested balance by month for the quarter and the percent of the portfolio that was invested. The City aims to stay 100% invested at all times and has managed to average right at 100% for the fiscal year ended September 30, 2013. In addition, the portfolio had significantly outperformed the benchmark rate for each month during the year as seen on page 10. Jewell gave great cheers to Diana Ayala for doing a super job at keeping on track and active in the market on the City's behalf with all of her other responsibilities. Page 11 showed the City's interest income revenue over the last five fiscal years. FY 13 did not quite meet budget expectations. Page 12 shows how that was broken down over the funds. In keeping with the requirements of the investment policy, page 13 detailed sufficient collateral to cover all depository accounts. 16 Page 15 was the signed certification of the City investment officers. There was a detail listing of each investment by type of asset and by fund as of 9/30/2013, a schedule of purchases and maturities during the quarter and a schedule by maturity date of all remaining investments in the appendix section. Motion to approve 4th Quarterly or Annual FY2013 report and forward to the City Council for their acceptance at the January 28, 2014 Regular Meeting was given by Mayor Saleh and seconded by the Deputy City Manager Getchell. Motion approved by all members. The minutes from the prior meeting on 11/14/2013 which appeared on pages 16 and 17 of the report were approved by Deputy City Manager Getchell and seconded by Mayor Saleh. Motion approved by all members. Jewell gave an economic update that the report included First Southwest economic update for the quarter ending 9/30 but since the year of 2013 had ended she wanted to mention a few things noted in the markets at the end of the calendar year. First the 10 year Treasury note rose over the entire year as did mortgage rates. Payroll had grown and unemployment rates had decreased but much is because more laborers were staying out of the market. Inflation continued to be well below target rates for the Federal Reserve and Vining Sparks suggests that while tapering starts they do not see a change in the Fed funds Rate for another 25 months. Jewell mentioned since this is the annual report filing that the Investment Policy is reviewed and any changes are recommended by the committee to the City Council. Jewell stated that the policy is a good policy and at this time only recommend a few grammatical changes and no material changes. Deputy City Manager Getchell made a motion to approve grammatical changes and forward to City Council for their approval on January 28, 2014. Mayor Saleh seconded and the committee approved unanimously. Jewell stated the City has had a few brokers ask to be added to the list of approved brokers / dealers but since the City has had no concerns with existing brokers / dealers no changes were recommended at that time. Jewell brought up that at the November 2013 meeting the committee said that they would be interested in hearing more about what an investment advisor could do to help the City. PFM Asset Management is one of the popular investment advisors in the industry. Barry Baughier was nice enough to put into a packet for the committee to review what he sees the investment advisors role to be. Of course at the end was information regarding PFM but he did provide some excellent discussion at the beginning. The packets were distributed to the committee to review and discuss at the next meeting. Motion to adjourn was made by City Manager McKamie and seconded by Mayor Saleh at 3:53 pm. All voted in favor of the motion. 17 APPENDIX A-1 City of Euless Change in Portfolio Values by Asset and Investment Fund For the Quarter Ending September 30, 2014 Inv. CUSIP Maturity/ Par Market Value Market Value Change in Book Value Book Value Change in Type Number Call Date Value 09/30/2014 06/30/2014 Market Value 09/30/2014 06/30/2014 Book Value OPERATING FUNDS: FHLB 313382ML4 10/08/2014 1,000,000 1,000,030 1,000,359 (329) 999,460 999,820 (360) FHLB 313383DN8 05/26/2015 1,000,000 1,000,460 1,000,675 (215) 1,000,000 1,000,000 - FFCB 3133ECKX1 04/09/2015 1,000,000 1,000,740 1,001,041 (301) 998,890 999,630 (740) FFCB 3133ECJY1-1 03/26/2015 411,000 411,312 411,408 (95) 409,089 410,363 (1,274) FHLB 313383U25 02/02/2015 1,000,000 1,000,520 1,000,497 23 999,327 999,776 (449) FNMA 3136FM6V1 02/18/2015 400,000 402,880 404,700 (1,820) 402,349 404,111 (1,762) FFCB 3133ED4A7 10/07/2015 1,000,000 1,002,000 1,000,812 1,188 1,000,000 1,000,000 - FFCB 3133ED4X7 10/16/2014 1,000,000 1,000,020 1,000,272 (252) 1,000,000 1,000,000 - FHLB 313372ZX5 05/29/2015 700,000 709,100 710,669 (1,569) 706,770 709,672 (2,902) FHLB 313379ER6 06/12/2015 1,000,000 1,002,170 1,002,884 (714) 1,001,627 1,002,237 (610) FHLB 3130A0M98 01/13/2015 1,000,000 1,000,150 1,000,346 (196) 1,000,000 1,000,000 - FHLB 3130A0MK3 10/16/2014 500,000 500,015 500,063 (48) 500,000 500,000 - FHLB 3130A0SY7 01/23/2015 1,000,000 1,000,050 1,000,112 (62) 999,104 999,701 (598) FHLB 3130A0QG8 07/29/2015 1,000,000 1,001,040 1,001,452 (412) 1,000,374 1,000,374 - FFCB 3133EDFD9 05/14/2015 1,000,000 1,000,080 1,000,477 (397) 1,000,000 1,000,000 FFCB 3133EDEK4 09/10/2015 500,000 500,270 500,089 182 500,000 500,000 FHLB 3130A1DM7 03/12/2015 1,000,000 1,000,180 1,000,243 (63) 1,000,000 1,000,000 - FAMCA 31315P6C8 06/01/2015 1,000,000 959,530 999,850 (40,320) 1,000,000 1,000,000 - FHLB 3130A1QJ0 01/21/2015 1,000,000 999,930 1,001,452 (1,522) 999,775 999,925 (150) FHLB 3130A1UC0 11/23/2015 1,000,000 999,880 999,730 150 1,000,000 1,000,000 - FHLB 3130A1UD8 08/05/2015 1,000,000 999,510 999,336 174 999,550 999,850 (300) FHLB 3130A2C46 03/06/2015 1,000,000 1,000,020 999,800 220 1,000,000 1,000,000 - FHLB 3130A2G83 06/25/2015 1,000,000 1,000,150 999,977 173 1,000,000 1,000,000 - Purchases FHLB 3130A2ZY5 10/09/2015 1,000,000 999,700 - 999,700 1,000,000 - 1,000,000 FHLB 3130A2YY6 02/01/2016 1,000,000 999,900 - 999,900 1,000,000 - 1,000,000 FFCB 3133EDU83 03/02/2016 1,000,000 1,000,140 - 1,000,140 1,000,000 - 1,000,000 FFCB 3133EDHS4 03/28/2016 745,000 745,507 - 745,507 745,447 - 745,447 FFCB 3133EDV66 04/18/2016 1,000,000 1,000,600 - 1,000,600 1,000,000 - 1,000,000 FFCB 3133EDTM4 02/26/2016 1,000,000 999,160 - 999,160 999,550 - 999,550 Maturities FHLB 313382JF1 09/15/2014 1,000,000 - 1,000,245 (1,000,245) - 999,850 (999,850) FHLB 313382LU5 09/25/2014 1,000,000 - 1,000,278 (1,000,278) - 1,000,000 (1,000,000) FFCB 3133ECYQ1 09/03/2014 1,000,000 - 1,000,085 (1,000,085) - 1,000,000 (1,000,000) FFCB 3133EAYL6 07/18/2014 1,000,000 - 1,000,115 (1,000,115) - 1,000,870 (1,000,870) FHLB 3130A0MH0 07/17/2014 500,000 - 500,012 (500,012) - 500,000 (500,000) FNMA 31398A3G5 09/08/2014 1,000,000 - 1,002,584 (1,002,584) - 1,002,180 (1,002,180) FHLB 3130A1DX3 10/09/2015 745,000 - 745,000 (745,000) - 744,493 (744,493) Par total does not Total Operating: include maturities $ 26,256,000 $ 26,235,044 $ 26,784,560 $ (549,516) $ 26,261,311 $ 26,772,851 $ (511,540) A-1 A-2 City of Euless Change in Portfolio Values by Asset and Investment Fund For the Quarter Ending September 30, 2014 Inv. CUSIP Maturity/ Par Market Value Market Value Change in Book Value Book Value Change in Type Number Call Date Value 09/30/2014 06/30/2014 Market Value 09/30/2014 06/30/2014 Book Value CIP FUNDS FHLB 313381YP4 02/20/2015 1,000,000 1,000,630 1,000,730 (100) 997,378 999,647 (2,269) FFCB 3133ECJY1 03/26/2015 1,000,000 1,000,760 1,000,992 (232) 999,402 999,801 (399) FFCB 3133EANJ3 05/01/2015 1,000,000 1,002,070 1,002,704 (634) 1,001,408 1,002,011 (603) FFCB 3133ECR71 06/04/2015 1,000,000 1,001,330 1,000,969 361 1,000,000 1,000,000 FHLMC 3134G3H78 12/05/2014 500,000 500,250 500,499 (249) 500,653 500,653 Purchases None Maturities None Par total does not Total CIP: include maturities $ 4,500,000 $ 4,505,040 $ 4,505,894 $ (854) S 4,498,841 $ 4,502,112 $ (3.271) RESERVE FUNDS: FAMCA 31315PVZ9 04/24/2015 500,000 500,410 500,242 168 500,000 500,000 - FFCB 3133ED2R2 10/01/2014 500,000 500,000 500,079 (79) 500,015 500,015 - FFCB 3133ED7H9 02/13/2015 1,000,000 1,000,330 1,000,338 (8) 999,820 999,940 (120) FNMA 3136G1ZD4 09/28/2017 900,000 898,020 901,682 (3,662) 900,000 900,000 - FFCB 3133EDM82 11/27/2015 1,000,000 999,310 998,500 810 998,800 999,600 (800) FFCB 3133EDNX6 12/23/2015 1,000,000 999,650 999,800 (150) 1,000,000 1,000,000 - Purchases None Maturities None Par total does not Total Reserve: include maturities $ 4,900,000 $ 4,897,720 $ 4,900,641 $ (2,921) $ 4,898,635 $ 4,899.555 S (920) OVERNIGHT INVESTMENTS: Beginning Bal Ending Bal Texpool Balance 14,393,414 13,160,618 13,160,618 14,393,413 (1,232,796) 13,160,618 14,393,413 (1,232,796) Purchases 5,161,306 Maturities 6,394,102 - - Texstar Balance 17,380,657 15,027,055 15,027,054 17,380,657 (2,353,602) 15,027,054 17,380,657 (2,353,602) Purchases 7,001,398 - - Maturities 9,355,000 - - B ofT Balance 6,803 6,80; 6,804 6,803 1 6,804 6,803 1 Purchases 0 Maturities - Total Overnight: $ 28,194,476 $ 28,194,476 $ 31,780,873 $ (3,586,397) $ 28,194,476 $ 31,780,873 $ (3,586,397) Par total does not Total Portfolio include maturities $ 63,850,476 $ 63,832,280 $ 67,971,968 $ (4,139,688) $ 63,853,263 $ 67,955,390 $ (4,102,127) A-2 0 0 Federated Investors Trust .,.• `§ Q J F ~ LL • I (Ni UO T F c E 0 0 0 0. 0 O • o N 0 J O = N � m Tr V • U d (i 0 r O • J (=i OF U Y y O c m (� 1▪ 2:2 o N O V — E E 0 `0 o Z LL 2 0 0 0 LL d d LL LL z(i2 LL LL LL O 0 0 O 0 O 000 0 0 0 To To To 0 0 0 J J J `m 0 0x O o d 0 Money Mkt Fund O N 2' i 0 } Q 0 `0 O 0 a • d U E rnF O boa' + N LL Z c T a% 0 m E 0 g o 0_ LL E E 0 O 0 0 O c N — 0 ._. 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