CITY OF TACOMA. May Director of Finance Report. Finance Department Robert K. Biles, Director of Finance

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1 CITY OF TACOMA May 2009 Director of Finance Report Finance Department Robert K. Biles, Director of Finance

2 In accordance with the City of Tacoma s Charter, the Director of Finance prepares a monthly report which analyzes the city s revenues and expenditures for the prior period. This report covers the period ending May 31, Executive Summary As reflected in the table below, the City s General Fund experienced an unfavorable variance of $11.1 million through May This is a result of lower than expected tax revenues and a greater than anticipated expenditures for police and fire services. Period to Date Budget Period to Date Actuals Variance Favorable/ (Unfavorable) Revenues $ 93,763,924 $ 85,523,611 $ (8,240,313) Expenditures $ 84,088,108 $ 86,956,348 $ (2,868,240) $ 9,675,816 $ (1,432,737) $ (11,108,553) Through the end of May, sales tax collections ($1.9 million), business taxes ($1.5 million), and utility taxes ($3.9 million) have all been negatively impacted. Although economists are suggesting that there are signs of a recovery in the 4 th quarter of 2009, there will likely be a continuation of the unfavorable variance in general fund revenues in the short term. Expenditures are $ 2.9 million above budget. The Police and Fire departments are responsible for $ 2.2 million of this variance. Transfers account for an additional $914,000 of the unfavorable variance. Public Works ($679,000) and Human Rights/Human Services ($ 151,000) are under budget for the year to date.

3 Financial Reports Budget to Actual Comparisons The Budget and Research Division within the Finance Department is primarily responsible for budgetary control and analysis. They produce a quarterly Economic Status Report that provides an indepth review of the General Fund and offers additional perspective on the economic environment in which the City operates. For purposes of budgetary comparison reporting in the Economic Status Report, the actual amounts of revenues and expenditures are compared to the projected amounts. Projected revenues are based on revenue collection patterns over the last three years. Projected expenditures are based on the spending patterns of each department over the last three biennia. General Fund Reports The General Fund Budget vs. Actual Revenues by Category, General Fund Budget vs. Actual Expenditures by Category, and General Fund Expenditures by Department reports use the same projection methodology used in the Economic Status Report. This provides consistency between the two reports and reflects the City s best estimate of projected revenues and expenditures. Funds Report The monthly report of actual revenues and actual expenditures for all City funds includes yeartodate and bienniumtodate totals. This report is useful for assessing total revenues and expenditures for all City funds whereas other reports herein are focused mainly on the General Fund.

4 General Fund Budget vs. Actual Revenues by Category For the Month Ending May 31, /2010 Biennial Budget 2009/2010 Biennium to Date Projected Revenues 2009/2010 Biennium to Date Actual Revenues Variance Favorable/ (Unfavorable) % Collected Property Taxes $ 96,768,512 $ 20,250,795 $ 20,533,313 $ 282, % Sales Taxes $ 86,790,206 $ 18,125,879 $ 16,230,462 $ (1,895,417) 18.7% Business Taxes $ 81,793,625 $ 21,138,353 $ 19,635,844 $ (1,502,509) 24.0% Utility Taxes / Other Taxes (1) $ 98,308,675 $ 20,755,783 $ 16,891,548 $ (3,864,235) 17.2% Licenses & Permits $ 11,343,025 $ 2,559,702 $ 2,982,621 $ 422, % Intergovernmental Revenues $ 21,921,378 $ 3,913,484 $ 3,684,072 $ (229,412) 16.8% Charges for Services $ 7,636,860 $ 1,650,061 $ 1,039,235 $ (610,826) 13.6% Fines & Forfeits $ 8,975,500 $ 1,781,547 $ 1,768,901 $ (12,646) 19.7% Miscellaneous Revenues $ 13,368,369 $ 3,588,320 $ 2,757,615 $ (830,705) 20.6% Cash Balance (2) $ 13,886,950 N/A N/A N/A N/A Total $ 440,793,100 $ 93,763,924 $ 85,523,611 $ (8,240,313) 19.4% Cash Basis Presentation (1) Gross Earnings Taxes on utilities are estimated based upon the prior three years of activity. (2) Cash Balance is not considered a revenue so no variance is calculated for it. $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $ Projec Revenu Actual

5 General Fund Budget vs. Actual Expenditures by Category For the Month Ending May 31, / / /2010 Biennium to Date Biennium to Date Variance Biennial Projected Actual Favorable/ % Budget Expenditures Expenditures (Unfavorable) Expended Personnel Services $ 329,534,537 $ 66,840,589 $ 67,011,787 $ (171,198) 20.3% Supplies & Other Expenses $ 99,577,963 $ 15,629,668 $ 19,496,323 $ (3,866,655) 19.6% Capital Outlay $ 3,283,096 $ 603,433 $ 405,125 $ 198, % Debt Service $ 8,397,504 $ 1,014,418 $ 43,113 $ 971, % Total $ 440,793,100 $ 84,088,108 $ 86,956,348 $ (2,868,240) 19.7% Cash Basis Presentation $80,000,000 $60,000,000 $40,000,000 $20,000,000 $ Projected Expenditures Actual Expenditures

6 General Fund Expenditures by Department Actual vs. Budgeted Expenditures For the Month Ending May 31, / / /2010 Biennium to Date Biennium to Date Variance Total Projected Actual Favorable/ Department Biennial Budget Expenditures Expenditures (Unfavorable) City Council $ 1,372,627 $ 310,625 $ 307,870 $ 2,755 City Manager $ 2,682,050 $ 488,670 $ 437,758 $ 50,912 Economic Development $ 11,866,815 $ 2,083,813 $ 2,050,709 $ 33,104 Finance $ 6,722,885 $ 1,300,878 $ 1,346,061 $ (45,183) Fire $ 96,845,399 $ 19,223,812 $ 19,502,934 $ (279,122) Government Relations $ 620,736 $ 149,784 $ 171,706 $ (21,922) Hearing Examiner $ 846,438 $ 173,520 $ 151,183 $ 22,337 Human Resources $ 3,005,990 $ 528,926 $ 542,954 $ (14,028) Human Rights/Human Services $ 13,079,757 $ 1,988,123 $ 1,837,275 $ 150,848 Legal $ 7,307,173 $ 1,410,284 $ 1,421,285 $ (11,001) Library Operations $ 24,736,136 $ 4,652,867 $ 4,769,444 $ (116,577) Municipal Court $ 8,169,878 $ 1,641,328 $ 1,733,232 $ (91,904) Police $ 137,880,441 $ 28,174,025 $ 30,103,925 $ (1,929,900) Public Works $ 58,879,094 $ 11,281,234 $ 10,602,341 $ 678,893 NonDepartmental $ 20,044,021 $ 2,694,797 $ 3,076,697 $ (381,900) Transfers Interfund $ 36,527,860 $ 5,859,554 $ 6,058,409 $ (198,855) Transfers Outside Agencies $ 10,205,800 $ 2,125,868 $ 2,842,565 $ (716,697) Total $ 440,793,100 $ 84,088,108 $ 86,956,348 $ (2,868,240) Cash Basis Presentation $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $

7 City of Tacoma Funds Report Revenues and Expenditures by Fund For the Periods Ending May 31, 2009 May May YeartoDate YeartoDate BienniumtoDate BienniumtoDate Fund Fund Number Description Revenues Expenditures Revenues Expenditures Revenues Expenditures 0010 General Fund $ 29,700,950 $ 18,411,051 $ 79,124,358 $ 86,956,348 $ 79,124,358 $ 86,956, Courts Special Revenue Fund $ $ 7,110 $ 121,173 $ 7,110 $ 121,173 $ 7, Contingency Fund $ 7,281 $ 142 $ 1,529,390 $ 569 $ 1,529,390 $ Streets Special Revenue Funds $ 456,838 $ 2,557,222 $ 2,580,277 $ 6,214,081 $ 2,580,277 $ 6,214, Fire Dept Special Revenue Funds $ 58,551 $ 42,779 $ 442,433 $ 389,500 $ 442,433 $ 389, Public Works ROW Streets $ 3,761 $ 15,983 $ 30,491 $ 36,038 $ 30,491 $ 36, (1) Local Improvement Guaranty $ (3,247) $ 12,510 $ 23,130 $ 63,244 $ 23,130 $ 63, PW Engineering Paths & Trails Reserve $ 526,813 $ 131,608 $ 531,243 $ 561,078 $ 531,243 $ 561, PW Building & Land Use $ 73,855 $ 83,862 $ 411,788 $ 500,085 $ 411,788 $ 500, EMS Special Revenue Fund $ 4,018,033 $ 943,275 $ 5,222,513 $ 4,503,251 $ 5,222,513 $ 4,503, Tourism & Conventions $ 294,018 $ 1,235 $ 946,960 $ 4,841 $ 946,960 $ 4, HRHS Special Revenue Funds $ 343,812 $ 245,294 $ 647,833 $ 643,728 $ 647,833 $ 643, CED Economic Development Grants $ 566,819 $ 396,338 $ 3,571,033 $ 2,201,441 $ 3,571,033 $ 2,201, Library Special Revenue Funds $ 18,536 $ 7,296 $ 72,353 $ 279,740 $ 72,353 $ 279, Finance HALO $ 18,486 $ 19,759 $ 130,151 $ 131,520 $ 130,151 $ 131, Police Special Revenue Funds $ 58,307 $ 109,500 $ 701,952 $ 569,067 $ 701,952 $ 569, (2) Foss Waterway Dev Authority Spec Rev $ $ $ 9 $ (2,310) $ 9 $ (2,310) 1400 Legal Special Revenue Fund $ 27 $ 2,577 $ 12,644 $ 3,426 $ 12,644 $ 3, IT Municipal Cable TV $ 194,987 $ 223,170 $ 1,058,595 $ 1,067,928 $ 1,058,595 $ 1,067, PEGSP IT Special PEG Support $ 40,233 $ 25,160 $ 211,807 $ 32,745 $ 211,807 $ 32, Human Resources Special Rev $ 713 $ 14,015 $ 28,099 $ 48,807 $ 28,099 $ 48, Voted Bonds $ $ $ $ $ $ UTG UTGO Bond Redemption 2002 $ 1,077,551 $ $ 1,240,587 $ $ 1,240,587 $ AB LTD GO Bonds 1997 A&B $ $ $ $ $ $ C LTD Taxable GO Bds 1997 C $ $ $ $ $ $ 2038 CTED PWTF No Loan $ $ $ $ $ $ Public Works Trust Fund Loan $ $ $ $ $ $ 2039 LTGO Refunding bonds 2001 $ $ $ $ $ $ Bond Issue $ 497 $ 0 $ 2,253 $ 9,319 $ 2,253 $ 9, Capital Projects Fund $ 1,844,066 $ 3,369,535 $ 3,528,442 $ 5,796,617 $ 3,528,442 $ 5,796, Police Facility $ 376 $ 15,718 $ 1,804 $ 163,798 $ 1,804 $ 163, Parking Garage Capital Projects $ 255,431 $ 476,624 $ 263,673 $ 2,440,150 $ 263,673 $ 2,440, Airport $ 20,181 $ 6,250 $ 8,074 $ 45,681 $ 8,074 $ 45, Mountain Rail $ 203,811 $ 187,744 $ 1,126,626 $ 1,207,642 $ 1,126,626 $ 1,207, CAPTL Thea Foss Waterway Capital $ 45 $ $ 446 $ 34 $ 446 $ Parking Garages $ 456,942 $ 384,309 $ 1,394,496 $ 750,178 $ 1,394,496 $ 750, Convention Center & Bicentennial Pavilion $ 307,507 $ 365,708 $ 964,218 $ 1,743,014 $ 964,218 $ 1,743, Cheney Stadium $ 4,709 $ 25,978 $ 22,810 $ 133,255 $ 22,810 $ 133,255 Modified Accrual Basis (1) The debit balance for revenues is a result of the amortization of premiums paid for assets in this fund. Since interest is earned on the par amount rather than the purchase amount, the transaction underlying this entry reduces the interest revenue. (2) The credit to YTD expenditures is a result from transferring cash back to Fund 1300 for leasehold tax payments.

8 City of Tacoma Funds Report Revenues and Expenditures by Fund For the Periods Ending May 31, 2009 May May YeartoDate YeartoDate BienniumtoDate BienniumtoDate Fund Fund Number Description Revenues Expenditures Revenues Expenditures Revenues Expenditures 4180 Tacoma Dome $ 335,247 $ 378,684 $ 2,719,982 $ 2,239,394 $ 2,719,982 $ 2,239, Performing Arts Funds $ 74,037 $ 704,194 $ 537,965 $ 1,084,912 $ 537,965 $ 1,084, Solid Waste $ 4,764,013 $ 4,317,790 $ 23,685,357 $ 21,002,428 $ 23,685,357 $ 21,002, Wastewater $ 4,354,464 $ 3,963,579 $ 22,305,437 $ 20,556,534 $ 22,305,437 $ 20,556, Surface Water $ 2,027,710 $ 1,619,388 $ 9,758,721 $ 7,868,634 $ 9,758,721 $ 7,868, Union Station Funds $ 232,388 $ 232,384 $ 1,164,317 $ 1,164,058 $ 1,164,317 $ 1,164, Tacoma Rail $ 1,453,440 $ 1,424,841 $ 7,390,541 $ 7,428,834 $ 7,390,541 $ 7,428, Tacoma Water $ 5,385,145 $ 5,319,142 $ 28,373,320 $ 28,302,595 $ 28,373,320 $ 28,302, Tacoma Power $ 32,254,750 $ 33,781,634 $ 163,149,874 $ 144,905,432 $ 163,149,874 $ 144,905, TPU Self Insurance $ 37,528 $ 34,389 $ 180,042 $ 322,365 $ 180,042 $ 322, Low Income Assistance $ $ $ $ $ $ 4850 Conservation Project $ 374 $ $ 1,526 $ $ 1,526 $ 5007 Finance $ 186,027 $ 169,413 $ 944,476 $ 894,687 $ 944,476 $ 894, Finance Budget and Research $ 87,400 $ 83,953 $ 291,441 $ 276,853 $ 291,441 $ 276, Business Systems Improvement Project $ 652 $ $ 927 $ 1 $ 927 $ Human Resources $ $ $ $ $ $ 5042 Graphic Services $ 96,863 $ 130,187 $ 567,920 $ 645,326 $ 567,920 $ 645, TPU Fleet Services $ 716,637 $ 589,703 $ 3,670,535 $ 2,070,336 $ 3,670,535 $ 2,070, Youth Build Tacoma $ 469 $ $ 1,826 $ $ 1,826 $ 5400 Equipment Rental $ 889,171 $ 507,593 $ 4,306,936 $ 4,291,682 $ 4,306,936 $ 4,291, Asphalt Plant $ 93,834 $ 55,510 $ 206,953 $ 178,137 $ 206,953 $ 178, Comm Equipment Replacement Reserve $ 224,903 $ 171,589 $ 1,247,185 $ 1,012,991 $ 1,247,185 $ 1,012, Third Party Liability Claims $ 279,076 $ 160,456 $ 1,593,126 $ 921,347 $ 1,593,126 $ 921, Unemployment Compensation Fund $ 41,611 $ 1,901 $ 158,045 $ 4,527,766 $ 158,045 $ 4,527, Worker's Compensation Fund $ 743,052 $ 757,188 $ 3,641,416 $ 3,169,438 $ 3,641,416 $ 3,169, Municipal Bldg Acquisition & Oper $ 451,384 $ 373,162 $ 2,273,831 $ 1,888,256 $ 2,273,831 $ 1,888, Information Systems $ 2,211,826 $ 2,086,412 $ 8,997,126 $ 8,564,915 $ 8,997,126 $ 8,564, Deferred Compensation Trust $ 45,010 $ 6,124 $ 92,726 $ 49,513 $ 92,726 $ 49, (3) Tacoma Employees Retirement $ 3,704,765 $ 5,985,113 $ (96,926,884) $ 26,057,775 $ (96,926,884) $ 26,057, Relief & Pension Police $ 531,130 $ 478,387 $ 2,646,646 $ 2,290,037 $ 2,646,646 $ 2,290, Relief & Pension Firefighters $ 905,090 $ 530,899 $ 3,250,854 $ 2,867,279 $ 3,250,854 $ 2,867, Health Care Labor Management $ 4,409,283 $ 4,321,416 $ 22,049,099 $ 15,954,626 $ 22,049,099 $ 15,954, Group Life Trust $ 67,591 $ 63,880 $ 333,593 $ 317,332 $ 333,593 $ 317, Dental Care Labor Management $ 442,425 $ 444,624 $ 2,223,285 $ 2,241,612 $ 2,223,285 $ 2,241, Health Care Firefighters $ 303,738 $ 260,303 $ 1,516,637 $ 907,067 $ 1,516,637 $ 907, Health Care Police $ 250,961 $ 238,647 $ 1,252,158 $ 1,130,184 $ 1,252,158 $ 1,130, LESA $ 1,522,942 $ 1,800,128 $ 9,106,130 $ 8,139,058 $ 9,106,130 $ 8,139, (4) Foss Waterway Dev Authority Agency Fd $ 38,991 $ (332,030) $ 244,443 $ 376,934 $ 244,443 $ 376,934 TOTAL $ 109,713,816 $ 98,742,338 $ 338,909,171 $ 440,150,266 $ 338,909,171 $ 440,150,266 Modified Accrual Basis (3) Tacoma Employes Retirement reported a net loss of $4.5 million dollars in its investments for the month, which is significantly lower that previous months. The loss is comprised of a gain of $0.6 million from the US core fixed income, a loss of $ 2.7 million from the real estate investment, a loss of $1.4 million from the international equity asset class and a loss of $ 1.0 million from the high yield fixed income. (4) The credit entry in the monthly expenditures reflects a reimbursement of expenses incurred as part of the North End Transient Moorage project.

9 Treasurer s Report Background The City Charter charges the City Treasurer with the responsibility for investing City monies in accordance with the stated Investment Policy. The Charter established a Finance Committee consisting of the Mayor, Finance Director and City Treasurer and makes the Finance Committee responsible for the City s Investment Policy. Under the guidance of the Investment Policy, the City s Treasurer operates the investment portfolio as the Tacoma Treasury Investment Pool (TIP) where each fund has an undivided interest in the TIP. The City Treasurer manages investments to preserve principal while maximizing income and maintaining liquidity to meet the City s cash needs. As the preservation of principal is the paramount objective, investments are selected in a manner that will strive to ensure safety of principal. This safety of principal is very important; even more so in this current time of financial and credit crisis. The City s investments are limited to those specified by State statute. Several financial tools including the graphs included in this report are used to help determine the direction of interest rates and help in managing the TIP.

10 Interest Rates Interest rates continually fell from 2007 and into From September 18, 2007 to December 16, 2008 there were a series of cuts in Federal Funds rates from 5.25% to the current range of 0.0% to 0.25% and they have remained at the level through May 31, This is the first time since 1958 that Federal Funds rates have been below 1%. These rate cuts were primarily due to the subprime mortgage crisis and a credit liquidity crisis, which led to the banking crisis and ultimately, the fears which preceded the current economic downturn. The interest rate curve has steepened and shifted downward since Investors high demand for U.S. Treasury securities caused the very, very low rates on the short end of the interest rate curve. The following graph shows U.S. Treasury securities from the 3 month Treasury bill to the 30 year Treasury bond, comparing May 30, 2008 to May 29, For May 29, 2009 the solid white line starts at the yellow arrow with the 3 month Treasury bill yielding only 0.130% which is a further drop from April 30, 2009 of.146%. The line peaks out at a low of 4.336% for 30 year Treasury bonds which is up from 4.019%. With the low end rate dropping and the top end rate raising, this is referred to as a treasury interest rate curve steeping. The upward sloping curve, a normal yield curve, reflects the higher cost of borrowing because of higher credit risk over time. This analysis is useful in helping make investment decisions. In 2000 and again in 2006, short term interest rates moved up rapidly due to Federal Reserve tightening policy. Both periods were followed by a rapid decline in short term interest rates due to Federal Reserve loosening policy. Because TIP invests in longerterm maturities, its earnings have less volatility and higher returns through the interest rate cycle.

11 In the last 28 years we have had four interest rate cycles. The following graph shows two recent interest rate peaks occurring in mid 2000 and in mid For these two cycles when the 2year U.S. Treasury note broke below the Federal Funds rate, as indicated by the red area, it was a precursor that the Federal Reserve was at the last Federal Funds rate increase for that cycle and a decrease would probably occur in about 12 months. Starting in April 2008, the 2year U.S. Treasury note briefly broke above the Federal Funds rate, which is indicated by the green area. Conversely, this tends to indicate the Federal Reserve is near the end of Federal Funds rate cutting which it did with the December 16 th cut to a range of 0.25%. We are at the end of rate cutting for this interest rate cycle as we cannot go lower than 0%. With these cuts there is the specter of a recession emerging again. This is the market prediction as the 2year U.S. Treasury note closed at % on May 29, 2009 as shown at the yellow arrow with Federal Funds lower at a 0.25%. The rate on the 2year note is set by market conditions, but this indicates the market reflects in advance the Federal Reserve interest actions to raise or lower the Federal Funds rate. This analysis is useful in helping make investment decisions. Many economic and market factors have emerged since last year to push rates down, and the above graph predicted the Federal Funds rate cuts in this cycle.

12 Interest Rate Outlook for 2009 In 2009, the economy should start to demonstrate signs of a slow recovery. However, Federal Reserve officials fear the U.S. economy might fall into a selfreinforcing cycle of rising unemployment and slumping business and slower consumer spending, making credit tighter in a weak financial system, according to the minutes of the Federal Reserve s March meeting. A key measure of recovery and growth of the economy is the Gross Domestic Product (GDP). The two following interest rate projections are provided to consider the interest rate environment for The first table on January 26, 2009 from a major investment bank, UBS, shows their projected growth in GDP by quarter. Starting at a negative growth in GDP of 3.00% in Q1 2009, UBS is projecting a positive growth of 2.00% by Q The Federal Funds rate remains extremely low at 0% to 0.25% for the entire year. The 5 year Treasury rate is projected to be 2.50% by Q Source: UBS Below, is a similar table dated May 1, 2009 from J. P. Morgan and shows a more conservative outlook for It forecasts the Federal Funds rate at 0% to 0.25% for the entire year and the 5 year Treasury rate at a range of 1.40% to 1.60%. This is a more conservative outlook on the economy. U.S Interest Rate Forecast Actual Q2 09 Q3 09 Q4 09 Q Apr09 30Jun09 30Sep09 31Dec09 31Mar10 Rates Fed funds target mo LIBOR month Tbill yr Treasury yr Treasury yr Treasury yr Treasury Source: J.P. Morgan Both of the above interest rate forecasts have interest rate projections at very low historical rates for 2009 compared to the average 5 year Treasury rate of 4.12% over the last ten years. From an investment perspective and prediction tool we would not want to investment too far out the interest rate curve and risk holding low rate securities when rates will most likely will rise in the next few years.

13 Investments The Tacoma Treasury Investments table below shows the TIP s investments as of May 31, The Maximum Concentration Limit is the maximum in any one legal investment type which is set by the City s Finance Committee. This is established as a part of the diversification strategy to minimize risk. The following table demonstrates compliance with this policy. As of May 31, 2009, the TIP investment par value was $896,019,602 investment cost was $890,411,039, and the market value was $893,609,679. Par Value Percent of Concentration Legal Investment Type May 31, 2009 Total Portfolio Limit Tacoma Treasury Investment Pool Bank Interest Bearing Accounts $ 100,131, % 100% State Local Government Pool $ 48,015, % 25% Secured Repurchase Agreements 0.00% 25% US Treasury Securities 0.00% 100% Commercial Paper 0.00% 10% Municipal Securities $ 141,930, % 25% Federal Home Loan Mortgage Assn (Freddie Mac) $ 206,180, % 50% Federal Agriculture Mortgage Corp (Farmer Mac) $ 22,090, % 50% Federal Farm Credit Bank (Farm Credit) $ 58,060, % 50% Federal Home Loan Bank (Home Loan) $ 86,430, % 50% Federal National Mortgage Assn (Fannie Mae) $ 207,460, % 50% Tacoma Treasury Investment Pool Subtotal: $ 870,302, Fund Specific Investments: US Treasury Securities $ 3,541, % 100% Secured Repurchase Agreements $ 8,761, % 25% Municipal Securities $ 2,845, % 25% Commercial Paper $ 10,570, % 10% Fund Investment Subtotal: $ 25,717, Tacoma Investments: $ 896,019, %

14 The following graph shows the interest rates of 2year U.S. Treasury Notes since After briefly passing 5.00% in mid 2006 and touching 5.00% twice in the first half of 2007, rates have dropped rapidly in the second half of 2007 and into A sign that the Federal Reserve is at the end of easing rates is the 2year U.S. Treasury Note bottoming out in the spring of 2008 and at a bottom of.92% at the yellow arrow at the lower right on April 30, The yellow arrow at the left of the chart indicates the 2 year U.S. Treasury Note reached a 7.00% rate, an unbelievable high rate when judged by recent markets. This analysis is useful in helping make investment decisions as we have perspective of where these interest rates are, have been and can expect rates to raise as the economy improves. The green arrow is at the average over the time period of this graph. Investment Return In 2000 the TIP was established as an active investment pool alternative to the state Local Government Investment Pool (LGIP). The result has been over $56 million of additional interest earnings. The TIP purchases appropriate investments depending on market and economic conditions. For the first 5 months of 2009, the TIP purchased $638 million in federal agency notes and taxable municipal general obligation bonds with an average yield of 2.89%. During this period the LGIP average yield was.83%. The yield of the TIP portfolio, as of May 31, 2009, is 3.17%.

15 Tax & License Report The City s Tax & License Division is responsible for the administration and collection of the City s Business & Occupation (B&O) Tax and licensing the businesses operating within the City. A total of 101 new businesses applied for licenses during the month of May for a yeartodate total of 758 new business licenses. Businesses that change form of legal ownership (e.g. from a partnership to a sole proprietor) are included in the count of new business licenses. The table below provides a comparison of B&O tax collections by month for 2008 and As many businesses have seasonal variations in their business activities, this monthtomonth comparison is useful in evaluating real changes in tax collections over the previous year. Monthly B&O Tax Collections Comparison New Businesses Difference January $ 5,407,717 $ 3,254,058 $ (2,153,659) February $ 5,746,847 $ 6,415,469 $ 668, March $ 1,667,470 $ 2,100,041 $ 432, April $ 4,282,647 $ 4,030,328 $ (252,319) May $ 5,348,334 $ 3,784,940 $ (1,563,394) Total $ 22,453,015 $ 19,584,837 $ (2,868,178)