City Of Holland. Cash and Investment Portfolio Performance and Status Report. City Council and City Manager. For The Fiscal Year

Transcription

1 City Of Holland Cash and Investment Portfolio Performance and Status Report To City Council and City Manager For The Fiscal Year July 1, 2008 June 30, 2009 Submitted By: City Finance / Treasurer s Office January 13, 2010

2 Correspondence from the Finance / Treasurer Office To: From: Mayor, City Council and City Manager Tim Vagle, Finance Officer/Treasurer Date: January 13, 2010 Re: ANNUAL CASH & INVESTMENT REPORT: FISCAL YEAR 2009 INTRODUCTION CONTENT OF THIS REPORT In accordance with provisions of the City of Holland's Cash & Investment Policy, presented herein is the Annual Cash & Investment Performance and Status Report for fiscal year ended June 30, In addition to this narrative, the report includes table and graph presentations of the following: Status of Cash and Investment Portfolio at fiscal year-end (June 30, 2009). Status of Certificates of Deposit at June 30, Certificates of Deposit Transactions throughout the fiscal year July 2008 thru June Status of Long-Term Securities at June 30, Average Daily Portfolio Balance, Investment Income, and Rate of Return FY2009. Line-Graphs and Bar-Graphs providing history and trend analysis. Summary of Credit/Debit Card Receipting for the past two fiscal years. Listing of All Existing Accounts With Financial Institutions (account numbers excluded). Status of Long-Term Securities at current FY2010. Average Daily Portfolio Balance, Investment Income, and Rate of Return FY2010 to date. INVESTMENT PORTFOLIO INFORMATION PORTFOLIO COMPOSITION Through most of the fiscal year, between 35% and 60% of the total portfolio was invested into federal government sponsored securities. These securities have a longer-term duration to maturity (one to three years), providing slightly higher rates of return, instant liquidity capabilities, and a high level of safety. Three different firms were utilized to purchase longer-term securities: Fifth Third Securities, Inc., Huntington Investment Company and UBS Financial Services, Inc. The remaining portion of the portfolio (between 40% to 65%) consisted primarily of short-term securities held in the form of certificates of deposit and money-market accounts.

3 Fiscal Year Cash & Investment Report to City Council and City Manager Page 2 of 4 To the Mayor, City Council and City Manager January 13, 2010 INVESTMENT PORTFOLIO INFORMATION ( c o n t i n u e d ) LONG-TERM SECURITIES Governmental reporting standards require marketable securities to be presented at market values (referred to as, 'mark-to-market'). Values of marketable securities with fixed interest rates tend to move in an inverse relationship to the open market interest rate environment: rising interest rate environment = market value of fixed rate securities generally declines falling interest rate environment = market value of fixed rate securities generally rises. The interest rate market environment for one-to-three year securities moved lower during the fiscal year July 2008 June One of the eight long-term securities held by the City of Holland matured during the fiscal year, one security was still held and six long-term securities held at 6/30/08 were called prior to normal maturity in FY09. As new securities were purchased with values representing current market conditions, at the end of the fiscal year there was an increase in market value of the entire portfolio as interest rates were steadily decreasing. To provide stability to the portfolio, the new securities purchased were staggered over a three-year period. In addition five additional one to two-year certificates of deposit were purchased from local banks in amounts ranging from $1 million to $2 million each. During FY09 the City began taking advantage of the new CDARS fully insured certificates of deposit program through Flagstar Bank. The closing FY09 long-term portfolio included two CDARS investments for a total of $2.95 million. In FY09 the City purchased our first Delinquent Tax Anticipation Note (DTAN) issued by Genesee County as authorized under Public Act 20. The current fiscal year s (2010) General Fund budget partially anticipated lower investment earnings. In the General Fund alone though, annual investment earnings are projected to fall $85,000 further below the adopted budget. SHORT-TERM SECURITIES Throughout the fiscal year, a relatively constant percentage of the City's total portfolio was maintained in short-term securities to meet the current or near-term requirements for day-to-day operations. This portion of the overall portfolio experienced declining interest rates throughout the fiscal year. The type of securities acquired for short-term investments included primarily Certificates of Deposit with local area banking institutions, as well as a small portion in Money Market Accounts. The City continues participation in the MBIA Michigan CLASS pooled investment program and the Fifth Third MAXSaver money market account. Since FY10 started the City now also participates in two local credit union public funds money market accounts. INVESTMENT PERFORMANCE FOR TOTAL PORTFOLIO Comparison of fiscal year to the previous fiscal year reflects the following: Fiscal Year 2008 Fiscal Year 2009 Average Daily Balance $ 26,891,269 $ 23,989,142 Annualized Rate of Return 4.746% 3.209% Annual Interest Earnings $ 1,276,263 $ 769,735 In tandem with the overall decreased portfolio average daily balance, the annual interest earnings steadily declined throughout FY09. A summary schedule is attached that provides additional detail.

4 Fiscal Year Cash & Investment Report to City Council and City Manager Page 3 of 4 To the Mayor, City Council and City Manager January 13, 2010 INVESTMENT PORTFOLIO INFORMATION ( c o n t i n u e d ) COMPLIANCE WITH CASH & INVESTMENT POLICY All cash and investment securities were transacted within the scope of items authorized by the Investment Policy. There were neither discrepant nor unusual transactions or events to report. CREDIT/ DEBIT CARD RECEIPTING CREDIT / DEBIT CARDS - RECEIPTING Comparison of fiscal year to the previous fiscal year reflects the following: Fiscal Year 2008 Fiscal Year 2009 Credit / Debit Card Receipting - Transactions 4,746 4,874 Credit / Debit Card Receipting - Amounts $ 387,459 $ 361,389 Credit / Debit Card Processing Fees $ 12,155 $ 11,179 Transaction volume increased 2.7% and dollar volumes decreased 6.73% compared to the previous fiscal year mainly due to lower construction permit activity. Dollar volumes increased at Cemetery, Nature Center and the new Kollen Park Boat Launch location, but decreased at the Windmill Island, City Hall and Recreation/Civic Center locations. Supporting detail schedules are attached. CREDIT CARDS ACCEPTANCE FOR PROPERTY TAXES Property assessments and taxes are available for online inquiry by individual parcel, and the software company (BS&A Software, Inc.) provides a taxpayer the capability to pay property taxes by credit card online (via a third-party vendor service that specializes in this type of service). The fee structure for using this credit card service is absorbed 100% by the taxpayer. Due to continued taxpayer requests for providing this payment option, the City Treasurer s office obtained approval from Council to begin offering this service prior to the Summer 2007 property tax billing season (FY 2008). The summary schedule below reflects the history of this online credit card program. Tax Cycle Dollar Amount Transaction Count Summer 2007 $111, Winter 2007 $ 23, Summer 2008 $ 70, Winter 2008 $ 29, Summer 2009 $102,343 41

5 Fiscal Year Cash & Investment Report to City Council and City Manager Page 4 of 4 To the Mayor, City Council and City Manager January 13, 2010 BANKING AFFILIATIONS AND CONSIDERATIONS BANKING SERVICES CONTRACT In December 2002, the City Council approved a three-year contractual agreement with Fifth Third Bank for banking services, to include bank accounts, online banking, long-term investment securities transactions and safekeeping, credit card receipting, and credit card disbursements (not presently activated). An additional two-year extension to the banking contract was approved in January 2006 which expired on January 31, Changes to the purchasing ordinance recommended by the audit committee were implemented that allowed for a competitively negotiated banking contract without requiring a formal banking services request for proposal (RFP) process. A three-year contract extension with Fifth Third Bank was negotiated for the period February 1, 2008 through January 31, For fiscal year , the business relationship between the City of Holland and Fifth Third Bank again proved to function well; as did the City's relationships with the various other local area banks and financial institutions with escrow account affiliations. NEW PROGRAMS PROCUREMENT CREDIT CARDS DEPARTMENTAL DISBURSEMENTS On March 18, 2009 City Council adopted a credit card (procurement card) policy and program to enable limited and strictly controlled credit card purchases. A program was implemented through Fifth Third Bank which to date has worked out very well. Previously employees were forced to use their own personal credit cards, and later get reimbursed by the City, for purchases that could only be transacted by credit card payment.

6 SEVEN-YEAR RECENT HISTORY OF INTEREST RATES FOR REPRESENTATIVE SECURITIES IN THE OPEN FINANCIAL MARKETS ( MATURITIES OF 6 MONTHS, 2 YEARS AND 10 YEARS ) INTEREST RATE PERCENTAGE Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec Year T-Note Rate 2 Year T-Note Rate 6 Month CP Rate

7 CITY OF HOLLAND - POOLED FUNDS FIVE-YEAR OVERVIEW OF INVESTMENT INTEREST EARNINGS & MARKET VALUE ADJUSTMENT 2,100,000 1,800,000 1,500,000 1,200,000 1,228,855 1,276,263 D O L L A R S 900, , , , , , , , , ,094 62, , ,000 FY2005 FY2006 FY2007 FY2008 FY2009 INVESTMENT INCOME MARKET WRITE UP/DOWN

8 CITY OF HOLLAND - POOLED FUNDS OVERVIEW OF TRENDS IN INVESTMENT EARNINGS DOLLARS 2,400,000 2,200,000 2,000,000 1,800,000 1,600,000 A R S D O L L 1,400,000 1,200,000 1,000, , , , ,000 0 (200,000) (400,000) (600,000) FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 N e t I n v e s t m e n t E a r n i n g s, I n c l u d i n g M a r k e t W r i t e U p s ( D o w n s ) R e g u l a r E a r n i n g s / G a i n s, E x c l u d i n g M a r k e t W r i t e U p s ( D o w n s ) M a r k e t W r i t e U p ( D o w n ) o f S e c u r i t i e J u n e 3 0 o f E a c h F i s c a l Y e a r