Department of Treasury Local Government Resources Virginia Government Finance Officers Association

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1 Department of Treasury Local Government Resources Virginia Government Finance Officers Association Fall 2017 Conference

2 Department of Treasury Overview Finance Secretariat Department of Accounts Department of Planning and Budget Department of Taxation Department of Treasury Virginia Resources Authority State Treasurer, a gubernatorial appointee, serves on many boards: Virginia College Savings Plan (Virginia529) Virginia Housing Development Authority Virginia Port Authority Virginia Resources Authority Virginia Small Business Financing Authority 2

3 Department of Treasury Overview (Cont.) 3

4 Cash Management & Investments

5 Local Government Investment Pool (LGIP) Overview The 1980 session of the Virginia General Assembly enacted the LGIP Act (Sections through of the Code of Virginia) to provide Virginia localities with a professionally managed money market portfolio under the governance of the Virginia Treasury Board LGIP Portfolio consists of two fund options: LGIP LGIP Extended Maturity (EM) 5

6 LGIP and LGIP EM Comparison LGIP Maturity: Maximum 60 days Rating: AAAm Share price: $1 (Stable) Withdrawals: Daily with notice before 10:00 am Minimum balance: $1 Fee: 4 basis points (0.04%) Max. Security Maturity: 13 months, fixed rate 2-years, sovereign floating rate Marked-to-Market Weekly LGIP Operating Reserve to accrue to 0.5% of NAV LGIP EM Maturity: 1.0 years +/- 3 months Rating: AAAf / S1 Share price: Fluctuating Withdrawals: Weekly with 1 week advanced notice Minimum balance: $25,000 Fee: 8 basis points (0.08%) Max. Security Maturity: 5 years Treasury/Agency 1 year, all others Marked-to-Market Daily No Reserve 6

7 LGIP and LGIP EM Comparison (Cont.) LGIP Oversight: Treasury Board Reporting: Daily yield posting Weekly to S&P Monthly to Treasury Board Monthly Participant Statements Manager: Treasury Staff Custodian: JP Morgan Transfer Agent: US Bank Depository: Bank of America LGIP EM Oversight: Treasury Board Reporting: Monthly yield on statements Monthly to S&P Monthly to Treasury Board Monthly Participant Statements Manager: Treasury Staff Custodian: JP Morgan Transfer Agent: US Bank Depository: Bank of America 7

8 LGIP and LGIP EM Snapshot Portfolio Statistics (As of August 31, 2017) LGIP: Weighted Average Maturity 44 days Yield 1.22% Share Price $1.00 Accounts and Net Assets 798 / $4.3 billion LGIP EM: Weighted Average Maturity days Effective Duration 1.00 years NAV Yield to Maturity 1.28% Share Price $10.00 Monthly Total Return 0.157% Accounts and Net Assets 9 / $65 million 8

9 LGIP Contact Information Tim Wilhide, Director Neil Boege, Chief Investment Officer Judy Milliron, Senior Investment Analyst Cash Management & Investments LGIP Website 9

10 Unclaimed Property

11 Unclaimed Property (UCP) Overview Consumer Protection Law Designed To: Protect the property rights of the absentee owner and reunite owner with the property Provide holders relief from the responsibility of record keeping and from any liability Provide the use of any unclaimed property funds to the benefit of the general public not to the chance possessor Protect The Property Interests Of Citizens By: Promoting compliance with the UCP Act and escheats generally statute Return property to the rightful owner 11

12 UCP Division s 5 Units AUDIT CLAIMS RECORDS & RECEIPTS PUBLIC RELATIONS & MARKETING SECURITIES 12

13 What is UCP? Insurance Proceeds Stocks, Dividends Customer Deposits or Refunds VA DEPT OF TREASURY UCP DIVISION Savings, Checking, CD s ANY FUNDS OR PROPERTY THAT COMPANIES LOSE TRACK OF THE RIGHTFUL OWNERS AND CONSIDER DORMANT Safe Deposit Box Contents Payroll or Commission Checks 13

14 UCP Holders Who Must Legally Report Unclaimed Property? Every Business and Governmental Entity Examples: All Governmental Agencies, financial institutions, insurance companies, utility companies, non-profit organizations, etc. Reporting Information November 1 ST Reporting Deadline for all holders of UCP they have as of June 30 th - except Insurance Companies Holding Period for Governmental Entities = 1 year Currently for accounts for 7/15/15 6/30/16 Negative Reports Not Required vamoneysearch.org Holder page includes information and instructions to file electronically using new Holder Reporting Portal. Reports with 25 owners or more must be filed electronically. 14

15 Amounts Returned to Rightful Owners $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- FY 2015 FY 2016 FY 2017 FY18 YTD UCP Returned Over $51.5 Million To Owners in Fiscal Year

16 UCP Partnership Opportunities How can governmental entities partner with UCP? Contact our PR & Marketing Manager to: Invite UCP staff to your next employee or citizen event. We will search for missing money on site for attendees Post a link to our free search site on your website or social media site Add our message to literature or blasts to your constituents Add our message to your intranet or HR communication Diana Shaban, PR & Marketing Manager diana.shaban@trs.virginia.gov 16

17 How to Get Unclaimed Property Our free search site allows citizens to quickly search for missing money and download a claim form to complete. It s quick, easy and it s a FREE SERVICE facilitated by The Virginia Department of Treasury Unclaimed Property Division. Go to and find what s yours! 17

18 UCP Contact Information Vicki Bridgeman, Director Diana Shaban, PR & Marketing Manager Bill Dadmun, Reporting & Remittance Manager UCP Click and Claim Website 18

19 Debt Management

20 Virginia Public School Authority (VPSA) Overview The Authority was created under the Code of Virginia in 1950 We operate several financing programs for public primary and secondary education Governed by an independent eight-person board the State Treasurer, the State Comptroller, the Superintendent of Public Instruction and five additional members appointed by the Governor Staffed by the Virginia Department of the Treasury Goals: To provide efficient market access and low-cost financing to Virginia Local Governments and their Public School Divisions Maintain high credit ratings to ensure the lowest possible cost of funds 20

21 School Financing Options Virginia local officials have a number of options available to address financing needs for school projects: General Obligation Bond issue by locality (Referendum may be required) Lease Revenue Bonds through a conduit issuer Bank Loan Virginia Public School Authority (VPSA) The option selected may depend on funding availability, circumstances in the locality, and the attributes of the project All subject to your own debt policy, i.e. types of debts and limitations on indebtedness VPSA manages four separate programs (Pooled Bond, Technology and Security Notes, Qualified Tax Credit Bonds and Stand Alone Bonds) 21

22 VPSA s Pooled Bond Program Overview First issuance through program in 1962 Bonds typically issued Spring and Fall Current Bond Resolution adopted in 1997 Over $2.3B in bonds outstanding for 105 local government borrowers For schools and only schools -- public K-12 Projects include all types of real and personal property for public schools, including land, buildings and equipment Bond bank structure Key Statistics Credit Ratings: Aa1/AA+/AA+ Bonds Outstanding: $2.3 Billion # of Borrowers: 105 Typical Issuance Cycle: Spring and Fall Authority issues bonds and uses the proceeds to purchase general obligation local school bonds Payments on local school bonds held by the Authority provide for the debt service on the VPSA bonds 22

23 VPSA s Pooled Bond Program (Cont.) Benefits for Borrowers Local general obligation pledge; Referendum NOT required No Costs of Issuance paid by borrowers Low interest rates supported by AA+, Aa1, AA+ ratings Financing terms can range from 10 to 30 years Amortization is typically level debt service or level principal 23

24 Stand Alone/Conduit Bond Program Overview First issuance over twenty-five years ago Over $500,000,000 currently outstanding Four borrowers have bonds outstanding Five borrowers have used the program ten times over the past ten years Bonds sold throughout the year at the request of the locality Bond rating based on general obligation rating of the local borrower VPSA purely serves as a conduit issuer Key Statistics Credit Ratings: Varies Bonds Outstanding: $500+ Million # of Borrowers: 4 Typical Issuance Cycle: Varies 24

25 Stand Alone/Conduit Bond Program (Cont.) Benefits for Borrowers Under the Code of Virginia, no referendum is required to issue bonds under the program Useful for highly rated localities that do not benefit from the VPSA s credit enhancements (i.e., have a rating equal to or higher than that of the Authority) 25

26 Qualified Tax Credit Bond Program Overview First issuance in 2009 Historically used to fund both Qualified School Construction Bonds (QSCB) and Qualified Zone Academy Bonds (QZAB) QSCBs issued and QZABs issued Recent QZAB issues have been funded through direct bank loans due to issuance size Typically sold in late fall Key Statistics Credit Ratings: Aa1/AA+/AA+ Bonds Outstanding: $360 Million # of Borrowers: 55 Typical Issuance Cycle: Late Fall This is a pooled program, with general obligation bonds issued to VPSA by the local governments 26

27 Qualified Tax Credit Bond Program (Cont.) Benefits for Borrowers Federally subsidized interest rates Amortization allowed up to Federally-allowed maximum maturity date Shared costs of issuance through pooled structure 27

28 VPSA Contact Information Janet Aylor, Director Jay Mahone, Public Finance Manager Melissa Palmer, Senior Financial Analyst Debt Management VPSA Website 28

29 Division of Risk Management

30 Division of Risk Management (DRM) Overview Administers Governor-approved risk management programs for localities and the people who serve them, including: Political subdivisions and statute-specified government entities Individuals and organizations providing services for public benefit Programs for liability protection apply to risk pools created by the division to spread participants civil liability financial risks Claim and litigation management services and access to loss control resources provided by division s employees Legal defense services provided by private attorneys appointed for the division by the Office of the Attorney General 30

31 Liability Plans Administered by DRM Faithful Performance of Duty Bond Plan (Bond) Va. Code , Bonds for a treasurer or director of finance, sheriff, clerk of the circuit court and commissioner of the revenue shall be provided through the state Department of the Treasury, DRM. Constitutional Officer and Regional Jail Risk Management Plan (VaRISK) Va. Code , DRM is responsible for establishing and administering the Commonwealth s Risk Management Plan for Constitutional Officers and Regional Jails. Among other things, the Plan provides liability protection from claims made against a Constitutional Officer or Regional Jail Authority, or any deputy, employee or agent of a Constitutional Officer, or any employee, agent or board members of a Regional Jail Authority, either first made or arising from any act occurring during the term of this coverage on causes of action established by law by reason of liability arising out of acts or omissions while acting in an authorized governmental or proprietary capacity and in the course or scope of employment or authorization. Virginia Liability Risk Management Plan (VaRISK 2) Va. Code , DRM is responsible for establishing and administering the Commonwealth s Liability Risk Management Plan. Among other things, the Plan provides liability protection from claims made against a Covered Party, either first made or arising from any act occurring during the term of this coverage on causes of action established by law by reason of liability arising out of acts or omissions while acting in an authorized governmental or proprietary capacity and in the course or scope of employment or authorization. 31

32 Bond Program Overview Local constitutional officers and regional jail personnel are required to participate in division-administered blanket surety bonding program (Section , Code of Virginia) Pays for losses caused by failure to account for money or properties as prescribed by law Pays for losses to the Commonwealth of Virginia or to the applicable locality Surety bonding program comprised of two instruments: Public Official Schedule Bond Faithful Performance of Duty Bond Plan Monetary limit: maximum of $500,000 or limits specified for each office by the Code of Virginia 32

33 VaRISK Program Overview Provides protection from liability claims and lawsuits brought against locally elected constitutional officers, regional jails and their appointees and employees Membership: Virginia s locally elected constitutional officers and Virginia s regional jails Monetary limits: For any one claim arising from a single occurrence or series of related occurrences: $1.5 million for sheriffs and their deputies $1.0 million for all other VaRISK members Applicable statutory limits for claims asserted under the Virginia Medical Malpractice Act VaRISK also pays members legal defense costs, plaintiffs attorneys fee awards, interest charged by the courts after entry of judgment, and appeal bonds 33

34 VaRISK Program (Cont.) Benefits of Participation VaRISK provides economical, low cost alternative to the commercial insurance market and protection from the market s fluctuations VaRISK protection includes the insurance industry s equivalent of public officials, errors and omissions, medical malpractice and other professional liability, and general liability coverage VaRISK staff provides prompt, dedicated claims and litigation management services Loss control services are available and can be designed for individual entity s needs Coverage is automatic; cost is paid by the Virginia Compensation Board 34

35 Overview VaRISK 2 Program Provides protection from liability claims and lawsuits brought against entities and individuals specified by statute Membership: Participation is voluntary and open to political subdivisions and parties providing services for the public benefit Participants include Virginia s free clinics, community services boards, soil and water conservation districts, social service agencies and many more Monetary limits: For any one claim arising from a single occurrence or series of related occurrences: $1 million Applicable statutory limits for claims asserted under the Virginia Medical Malpractice Act VaRISK 2 also pays members legal defense costs, plaintiffs attorneys fee awards and interest charged by the courts after entry of judgment Loss control services are available and can be designed for individual entity s needs 35

36 VaRISK 2 Program (Cont.) Benefits of Participation VaRISK 2 is administered by and for Virginia s public entities VaRISK 2 provides economical, low cost alternative to the commercial insurance market and protection from the market s fluctuations. Cost of membership is based only on losses incurred by Virginia s public entities VaRISK 2 protection includes the insurance industry s equivalent of public officials, errors and omissions, medical malpractice and other professional liability, and general liability coverage. Automobile coverage options are available VaRISK 2 staff provides prompt, dedicated claims and litigation management services Loss control services are available and can be designed for individual entity s needs 36

37 DRM Contact Information Don LeMond, Director Linda Lilly, Assistant Director Michael Parham, Senior Risk Manager DRM Website 37

38 Operations

39 SPDA Program Features Enacted by the 1973 General Assembly Title 2.2, Chapter 44 Establishes a single body of law in the Commonwealth to secure public deposits held in excess of federal deposit insurance coverage (FDIC) Administration of the SPDA is centralized at the state level under the control of the Virginia Treasury Board Program covers deposits of Virginia state and local governments Public deposits include deposits in demand deposit accounts, savings deposits, non-negotiable time deposits, and other transaction accounts Qualified public depositories are defined as a banking association, savings and loan, saving bank, or trust company authorized by the Treasury Board to hold public deposits through the execution of a public deposit security 39

40 SPDA Program Features (Cont.) Public depositories must be located in Virginia to become a qualified public depository defined as having a main office or branch office in the Commonwealth where deposits are accepted, checks are paid, and money is lent Requires depositories qualified to hold public deposits to collateralize the deposits in excess of FDIC by pledging securities to be held in the name of the Virginia Treasury Board In the event a depository defaults and is taken over by the FDIC, the Treasury Board has the authority to liquidate the securities pledged as collateral to recover public deposit balances 40

41 Collateralization of Public Deposits Pooled Method Liable for proportionate share of losses of uninsured and uncollateralized public deposits held by a pooled SPDA bank in default Tiered collateral requirements based on public deposit balances, adopted by Treasury Board in February 2009 Dollar Amount of Public Deposits above FDIC 100% collateralization of public deposits if ranked below average by IDC bank rating service Monthly reporting of public deposit balances Monthly reporting and pricing of collateral 20% haircut on mortgage-back securities Require Collateral % < $50MM 50% $50MM to $250MM 75% > $250MM 100% 41

42 Collateralization of Public Deposits Dedicated Method Not liable for losses of public deposits held by other public depositories Can only look to collateral pledged by opt-out bank to cover losses of public deposits if that bank fails Collateral requirements based on financial strength of each banking institution using IDC bank rating service Strength Collateral % Superior ( ) 105 Average ( ) 110 Below Average (75-124) 120 Lowest Rating (1-74) 130 Weekly reporting of public deposit balances Web-based reporting system with built-in edits Weekly pricing and reporting of securities 20% haircut on mortgage-back and some municipal securities 42

43 Number of Public Depositories by Collateralization Method (As of June 30) [VALUE] 39 (34%) (32%) (34%) (34%) (33%) (33%) (32%) 32 (33%) (100%) (100%) (66%) (68%) (66%) (66%) (67%) (67%) (68%) 65 (67%) Pooled Banks Dedicated Banks 43

44 Bank Mergers (July 2015 June 2017) Month Year Non-Survivor Surviving Bank July 2015 Valley Bank Bank of North Carolina October 2015 Shore Bank Bank of Hampton Roads March 2016 First National Bank Ronceverte Premier Bank June 2016 Bank of Georgetown United Bank June 2016 Monarch Bank Towne Bank July 2016 Bank of Floyd Grayson (Skyline) National Bank July 2016 First Bank Troy First Community Bank July 2016 Xenith Bank Bank of Hampton Roads (Xenith) August 2016 Bank of Virginia First Citizens Bank & Trust September 2016 First and Citizens Bank Summit Community Bank December 2016 River Community Bank Blue Ridge Bank, NA January 2016 TriSummit Bank HomeTrust Bank April 2017 Cardinal Bank United Bank April 2017 First Century Bank Summit Community Bank April 2017 Middleburg Bank Access National Bank April 2017 Virginia Commonwealth Bank Bank of Lancaster (Virginia Commonwealth Bank) June 2017 EVB SonaBank June 2017 Bank of North Carolina Pinnacle Bank 44

45 Billions Amounts Held at Public Depositories by Collateralization Method (As of June 30) $10.0 $9.0 $8.0 $7.6 $8.0 $8.8 $8.9 $8.3 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $- $4.9 $4.9 (100%) $4.1 $4.1 (100%) $5.1 $5.0 $4.7 $6.0 $5.9 $3.7 $3.5 $3.1 (73%) (70%) (66%) $1.4 $1.5 $1.6 $1.7 (27%) (75%) (78%) (30%) (34%) (22%) (25%) (25%) $6.3 $6.6 $5.9 (75%) (71%) (71%) $2.0 $2.2 $2.6 $2.4 (29%) (29%) Pooled Banks Dedicated Banks 45

46 Depositories Ranked Below Average by IDC Number of Depositories Ranked Below Average

47 Depositories Holding Largest Public Deposit Balances (Net of FDIC and Dollars in Millions) Depository June 30, 2016 June 30, 2017 Wells Fargo Bank, NA $1,945 $1,575 SunTrust Bank $1,405 $1,196 BB & T $1,046 $1,088 Bank of America $856 $779 Union Bank & Trust $411 $428 Towne Bank $291 $308 National Bank of Blacksburg $215 $221 47

48 Treasury Website 48

49 Treasury Website (Cont.) 49

50 Treasury Website (Cont.) 50

51 Treasury Website (Cont.) 51

52 On-Line Search Feature for Public Depositors 52

53 On-Line Search Feature for Public Depositors (Cont.) Quarterly, Qualified Public Depositories electronically submit their listings of public accounts to the Treasury Board Public officials need to verify that depositories are correctly reporting their public accounts to the Treasury Board Use Treasury s on-line search application of quarterly public deposit account balance data submitted by Virginia public depositories Website link: 53

54 SPDA Contact Information Kristin Reiter, Director Tracey Edwards, Manager, Trust Accounting Kathy Green, Assistant Manager, Agency Accounting SPDA and Website 54

2016 NASACT ANNUAL CONFERENCE

2016 NASACT ANNUAL CONFERENCE Collateralization of Public Fund Deposits Current Issues and Developments Laura Glenn Georgia State Treasurer s Office Dan Van Vooren Bank of America Merrill Lynch Moderated