10-05-2021 Investment Program UpdateInvestment rogram
Update
Finance Department
City Council Meeting
Octob'gf 9' IU21
Questions to Answer
1. How much is investable?
2. What are the guiding principles?
3. What are the purpose of our cash balances?
4.
�5.
What is our strategy?
Can we expect improved yield?
How much is investable?
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
$D
City of Federal Way
Cash Position Trend
4 rij 0 i 4 4 0 4 4 i 4 4
■Investments (yield) 0 LGIP (liquidity) ❑Checking (safety)
What Are The Guiding Principles?
Safety
Liquidity
Yield
What is the Purpose of Each Balance?
City of Federal Way
Cash Position Trend
$100,000,000
$80,000,000
$60,000,000
$40,000,000
$20,000,000
u
4 O 0 rij i 4 4 � 4 4 J i 4 4
■ Investment (yield) 0 LG IP (liquid it) ❑ Checkin (safetV)
Yield Curve — Time Value of Money
� Checking
v
Savings
0.09
Imo 3 mo 6 mo 1 Yr
I nvest
0.56%
0.31%
2 Yr 3 Yr 5 Yr
Time
Investment Policy Highlights
1. Safety and Liquidity - avoid risking principal
2. Treasuries and Agency Bonds (no stocks)
3. Highly regulated:
1. RCW Statutes
2. Public Deposit Protection Commission
3. Washington State Investment Board
4. Be transparent and accountable
What is Our Strategy?
Jan-
21
1,000,000
Feb-21
1,000,000
Mar-
21
1,000,000
Apr-
21
1,000,000
May-
21
1,000,000
Jun-
21
1,000,000
J u I
-21
1,000,000
Aug-
21
1,000,000
Sep-21
1,000,000
Oct-21
1,000,000
Nov-
21
1,000,000
Dec-21
1,000 000
Jan -22
1,000,000
Feb-22
1,000,000
Mar-
22
1,000,000
Apr-22
1,000,000
May-22
1,000,000
Jun-22
1,000,000
J u I -
22
1,000,000
Aug-22
1,000,000
Sep-
22
1,000,000
0 ct-
22
1,000,000
Nov-
22
1,000,000
Dec-
22
1,000,000
Ideally, one maturity per month
Jan-23
1,000,000
Feb-23
1,000,000
Mar-
23
1,000,000
Apr-23
1,000,000
May-23
1,000,000
Jun-23
1,000,000
J u I -23
1,000,000
Aug-23
1,000,000
Sep-23
1,000,000
Oct-
23
1,000,000
N ov-
23
1,000,000
Dec-
23
1,000,000
Diversify Re -investment Risk
Eliminate predicting the market
Yield Expectations
1. Diversify purchases in low -yield environment
2. Disciplined, gradual improvement
3. Prioritize certainty
(buy and hold to maturity)
4. Expect rates to be cyclical
(tune in to economic forecasts)
kS.5. Shorter maturities until 3-year yields hit 2.5%
Yield Expectations
Current Investment Pool Balance
Principal $ 73,000,000 $ 1,000,000
Yield 0.07% 0.07%
Interest Income $ 511100 $ 700
Annualized Potential at Current Rates
Investment $ 36,000,000 $ 36,000,000
Yield 0.07% 0.40%
Interest Income $ 251200 $ 144,000
Return on 20 minutes per month
Investment $ 1,000,000 $ 1,000,000
Yield 0.07% 0.40%
Interest Income $ 700 $ 41000
e,
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exp o
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Governance - What to Watch
✓Investment Policy— in place
V Safekeeping Agreement — in place
V Broker qualifications — checking, documenting
V Staff training
❑ Gradually increasing yields
❑ Monthly financial reports —anew section
�0 Investment Policy update
City of Federal Way
Finance Department
An increasingly well -managed city