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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