HomeMy WebLinkAbout2024.11.19 PPFD Meeting Presentation - Investment Policy ArbitragePPFD
Investment
Policy Review
November 19, 2024
Investment Options
•Local Government Investment Pool (LGIP)
•Funds are easy to invest
•Approximately day or two process to invest or redeem funds
•Net earnings based on interest earned, any gains and losses, less administrative fee
•Prospectus outlines program
•Risks
•Interest rate
•Liquidity
•Not a bank deposit – not insured nor guaranteed by FDIC
•US Bank IntraFi Cash Service (ICAS)
•Set up of account may involve more time
•Earnings rate dependent on principal amount invested
•$10M - $20M 3.5%
•$30M 3.75%
•Funds are invested to take advantage of Federal Deposit Insurance Corporation limits
Interest rates in each instrument are subject to change
Municipal Bonds and Arbitrage
•Tax-exempt municipal bonds are
subject to stringent federal arbitrage
compliance rules
•Investment of tax-exempt proceeds
at a rate the results in earnings
above borrowing rate
•Can result in remittance of earnings
and tax penalty to IRS
•Can impact federal tax-exempt
status if action deemed intentional
•Bond document, tax exemption and
non-arbitrage certificate:
•Identified $608,000 of expected
investment earnings
•Necessary to spend 75% of bond
proceeds plus $608,000 in
investment earnings, or
approximately $38M, within 18
months of issue date.
•Failure to meet spending
schedule requirement results in
irrevocable need to comply with
rebate requirements
Next Steps
•Local Government Investment Pool Prospectus has been provided to
augment informed consent of program elements, including risk
•To use LGIP investment program, approval of resolution is necessary
•Based on Board decision, funds investment will be undertaken through
fiscal agent action under advisement of the Executive Director