CITY OF SALEM CITY MANAGER S OFFICE FINANCE DIVISION

Transcription

1 CITY OF SALEM CITY MANAGER S OFFICE FINANCE DIVISION Si necesita ayuda para comprender esta información, por favor llame Disability-related modification or accommodation, including auxiliary aids or services, in order to participate in this meeting or event, are available upon request. Sign language and interpreters for languages other than English are also available on request. To request such an accommodation or interpretation, contact the Finance Division at at least two business days before meeting; or TTD/TTY telephone (503) , is also available 24/7. Committee Members Councilor Brad Nanke, Chair Mayor Chuck Bennett Councilor Matthew Ausec Council Steve McCoid CITY OF SALEM FINANCE COMMITTEE City Staff Steve Powers, City Manager Kacey Duncan, Deputy City Manager Dan Atchison, City Attorney Kelley Jacobs, Budget Officer David Lacy, Financial Operations Manager Tony Turley, Financial Reporting Manager Samantha Naluai, Management Analyst I Next Meeting: Monday, July 17, 2017 It is the City of Salem s policy to assure that no person shall be discriminated against on the grounds of race, religion, color, sex, marital status, familial status, national origin, age, mental or physical disability, sexual orientation, gender identity, and source of income, as provided by Salem Revised Code 97. The City also fully complies with Title VI of the Civil Rights Act of 1964, and related statutes and regulations, in all programs and activities. MEETING AGENDA Monday, June 26 th, :00 PM 1:00 PM City Manager s Conference Room 555 Liberty Street SE, Room Call to Order 2. Approval of Minutes a. March 20, Public Comment (Appearance of persons wishing to address the Committee on any matter other than those which appear on this Agenda.) 4. Action Items 5. Management Update/Information Items a. Discussion on current finance activity i. Prepayments ii. Water Sewer Refunding iii. Moody s Rating Report iv. GO Public Safety Bond Issuance v. GO Streets & Bridges Refunding b. Quarterly Investment Report 6. Continued Business 7. New Business 8. Adjournment

2 City of Salem Finance Committee Minutes DATE: March 20, 2017 STAFF LIAISON: David Lacy CHAIRPERSON: Brad Nanke PLACE: CMO Conference Room Members Present: Chair Nanke Mayor Bennett Member Ausec Member McCoid Members Absent: Guests Present: Lauren Brant, PFM Staff Present: Kacey Duncan, Deputy City Manager Dan Atchison, City Attorney Peter Fernandez, P.E., Public Works Director Kelley Jacobs, Budget Officer David Lacy, Financial Operations Manager Tony Turley, Financial Reporting Manager Anja Straw, Treasury Supervisor Josh Eggleston, Management Analyst II Samantha Naluai, Administrative Analyst I 1. CALL TO ORDER: 11:59 AM No quorum 2. APPROVAL OF FINANCE COMMITTEE MINUTES a. February 6, MANAGEMENT UPDATE / INFORMATION ITEMS a. Economic Analysis and Investment Trends: The Committee received the presentation from Lauren Brant, the Managing Director from PFM who is the City s investment advisor. b. Proposed Capital Improvement Plan: Josh Eggleston, Management Analyst II in the Budget Office, presented the proposed CIP. The Committee received answers to their inquiries regarding the weighted scoring matrix, project prioritization, and the master plan. 4. ADJOURNMENT: 1:00 PM The next meeting is Monday, June 26 th, at noon.

3 Investment Report - Quarter Ended March 31, 2017 City of Salem Quarterly Investment Report Quarter Ended March 31, 2017 Lauren Brant, Managing Director Allison Kaune, Senior Managing Consultant Meghna Purkayastha, Analyst PFM Asset Management LLC 650 NE Holladay Street, Ste Portland, OR fax PFM 1

4 Investment Report - Quarter Ended March 31, 2017 City of Salem Summary by Sector Amortized Cost Market 1 Value % of Portfolio Allowed by Policy U.S. Treasuries $44,404,212 $44,321,730 16% 100% Federal Agencies 46,324,068 45,956,657 17% 100% U.S. Instrumentalities 2,727,568 2,702,561 1% 10% Commercial Paper 44,548,216 44,557,669 16% Corporate Notes 25,136,127 25,069,582 9% 35% LGIP 86,145,339 86,145,339 31% ORS limit Collateralized Deposit Accounts 25,662,619 25,662,619 10% 100% Total $274,948,149 $274,416, % Combined Portfolio Statistics Combined Portfolio Yield on Cost (03/31/17) 1.13% Weighted Average Maturity (03/31/17) 0.83 years Combined Portfolio Earnings (excludes earnings on LGIP and deposit accounts) Cash Basis Earnings for Quarter $394,337 Accrual Basis Earnings for Quarter $488,788 Collateralized Bank Deposits 10% LGIP 31% AAA 2% Credit Quality Distribution AA 40% A 2 1% A-1+/A-1 (Short-term) 16% Percentage of Total Portfolio 1. Values as of March , including accrued interest. 2. Ratings by Standard & Poor s. Wells Fargo & Co is rated A by S&P, but rated AA- by Fitch and is in compliance with the City s investment policy and Oregon Revised Statutes. 3. Callable securities are included in the maturity distribution analysis to their stated maturity date, although they may be called prior to maturity. 60% 50% 40% 30% 20% 10% 0% 41% Combined Portfolio Maturity Distribution 3 17% Overnight 1 Day - 6 Months 6% 6-12 Months 17% 17% 2% 1-2 Years 2-3 Years Over 3 Years PFM 2

5 Investment Report - Quarter Ended March 31, % 1.5% 1.3% 1.0% 0.8% 0.5% 0.3% Interest Rate Environment Graph 1: 2-Year Treasury Yield 0.0% 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 Graph 1: Graph 1 plots the 2-Year U.S. Treasury Yield from December 31, 2015 to March 31, Yields increased sharply following the U.S. presidential election in November, - Yields then moved slightly higher in response to the Federal Open Market Committee (FOMC) raising the fed funds target rate in December and March. 2.5% Graph 2: U.S. Treasury Yield Curves 12/31/16 vs. 3/31/17 March 31, 2017 December 31, % 1.5% Graph 2: Graph 2 plots the yields of U.S. Treasuries at different maturities on December 31, 2016, and March 31, % 0.5% Yields on the short end of the curve ended the quarter higher, reflecting the FOMC s March rate hike. 0.0% 3 6 M M Source: Bloomberg 1 Y 2 Y 3 Y 5 Y Long-term yields generally held steady as inflation expectations decreased. PFM 3

6 Investment Report - Quarter Ended March 31, 2017 City of Salem Combined Portfolio Summary 1 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 Market Value (MV) $274,416,157 $273,053,566 $215,671,669 $233,843,603 Amortized Cost $274,948,149 $273,611,126 $215,482,887 $233,248,301 Quarterly Summary Quarter Ending March 31, 2017 Beginning MV $273,053,566 Change in Cash $1,169,418 Change in MV $193,173 Ending MV $274,416,157 PORTFOLIO RECAP The portfolio is in compliance with applicable state statutes and the City s Investment Policy C-7. The portfolio has sufficient liquidity to cover upcoming needs, is diversified among high-quality fixed-income sectors, and is of high credit quality. The benchmark for the City s Long-Term Portfolio has transitioned from the Bank of America Merrill Lynch (BAML) 0-3 Year Treasury index to the BAML 1-3 Year Treasury index. Yields on the City s Short-Term Portfolio and Streets and Bridges Portfolio are being compared to the LGIP yield. PFMAM s strategy is to maintain the portfolio duration close to the benchmark duration, unless there is a strong conviction that being shorter or longer will benefit the portfolio. At quarter end, the portfolio s duration was aligned with the benchmark s duration since market conditions were consistent with an economic outlook for moderate growth. Federal agency yield spreads remained historically tight throughout the quarter as demand continued to outpace supply. PFMAM evaluated agency spreads across the yield curve and took advantage of opportunities to swap out of expensive agency holdings into U.S. Treasuries at similar yields and purchase new issues that offered acceptable yield concessions, mostly in the 2-3 year maturity range. Yields on commercial paper (CP) rose sharply in the second half of 2016 due to significant money market fund reforms. Although spreads narrowed after the March Fed rate hike, CP continued to offer excellent investment opportunities in short-term credit instruments 1. Values as of quarter end, including accrued interest PFM 4

7 Investment Report - Quarter Ended March 31, 2017 City of Salem Portfolio and Benchmark Performance Total Return 1,2,3,4,5 Total Return for Quarter Ended March 31, 2017 Total Return for Past 1 Year Total Return for Past 3 Years Total Return Since Inception City of Salem Long-Term Portfolio 0.32% 0.44% 0.68% 0.62% Bank of America Merrill Lynch U.S. Treasury Index 0.26% 0.13% 0.52% 0.47% Yield Comparison 6 City of Salem Short-Term Portfolio 1.17% City of Salem Streets & Bridges Portfolio 1.26% Oregon LGIP 1.30% Oregon LGIP 1.30% Notes: Combined Portfolio Change Over Quarter Security Type Change in Allocation U.S. Treasuries -1% Federal Agencies +1% U.S. Instrumentalities - Municipal Obligations - Commercial Paper -2% Corporate Notes - LGIP -1% Collateralized Deposit Accounts +3% Percentage of Total Portfolio 60% 50% 40% 30% 20% 10% 0% 41% 39% Combined Portfolio Maturity Distribution 1. Performance on trade date basis, gross (i.e., before fees), in accordance with the CFA Institute s Global Investment Performance Standards (GIPS). 2. Bank of America/Merrill Lynch Indices provided by Bloomberg Financial Markets. Long-Term Portfolio benchmark was the BAML 0-3 Year U.S. Treasury index from inception through 6/30/2016 and the BAML 1-3 Year Treasury index beginning 6/30/ Quarterly returns are presented on an unannualized basis. Returns for periods greater than one year are presented on an annualized basis. 4. Inception date is December 31, Excludes Streets & Bridges, and Short-Term Portfolio as well as LGIP and bank balances in the performance and duration calculations. 6. Yield at Cost for the City s Short-Term and Streets and Bridges portfolios as of quarter end and Oregon LGIP rate as of quarter end. 17% 17% Overnight 1 Day - 6 Months 6% 6% December 31, 2016 March 31, % 17% 18% 17% 0% 2% 6-12 Months 1-2 Years 2-3 Years Over 3 Years PFM 5

8 Investment Report - Quarter Ended March 31, 2017 City of Salem Combined Portfolio Transactions 1 Trade Date Trade Type Security Maturity Date Broker Par Value Yield to Maturity S&P Rating 2/1/17 Sell FNMA NOTES 4/27/2017 Stifel, Nicolaus & Company, Inc 2,025, % AA+ 2/1/17 Sell FREDDIE MAC GLOBAL NOTES 6/29/2017 Keybanc Capital Markets 3,000, % AA+ 2/1/17 Sell US TREASURY NOTES 9/30/2017 BNP Paribas 2,500, % AA+ 2/1/17 Sell US TREASURY NOTES 11/15/2017 BNP Paribas 5,000, % AA+ 2/1/17 Buy UNITED STATES TREASURY NOTES 2/29/2020 Merrill Lynch (Bank of America) 6,000, % AA+ 2/1/17 Buy US TREASURY NOTES 10/31/2020 Merrill Lynch (Bank of America) 6,500, % AA+ 2/6/17 Maturity CREDIT AGRICOLE CIB NY COMM PAPER 2/6/2017 Maturity 2,500, % A-1 2/8/17 Buy BANK TOKYO-MIT UFJ NY COMM PAPER 5/26/2017 Bank of Toyota Mitsubishi (Direct) 2,500, % A-1 2/8/17 Buy CREDIT AGRICOLE CIB NY COMM PAPER 5/26/2017 Credit Agricole 2,500, % A-1 2/9/17 Maturity 2/23/17 Buy 2/24/17 Maturity BANK OF TOKYO MITSUBISHI COMM PAPER BANK TOKYO MITSUBISHI UFJ LTD COMM PAPER BANK OF TOKYO MITS UFJ LTD COMM PAPER 2/9/2017 Maturity 2,500, % A-1 8/30/2017 Bank of Toyota Mitsubishi (Direct) 2,500, % A-1 2/24/2017 Maturity 2,500, % A-1 1. Does not include transactions in the LGIP and bank accounts Continued on next page PFM 6

9 Investment Report - Quarter Ended March 31, 2017 City of Salem Combined Portfolio Transactions 1 Trade Date Trade Type Security Maturity Date Broker Par Value Yield to Maturity S&P Rating 2/27/17 Buy FNMA NOTES 2/28/2020 Goldman Sachs 6,000, % AA+ 2/27/17 Sell UNITED STATES TREASURY NOTES 2/29/2020 Merrill Lynch (Bank of America) 6,000, % AA+ 3/8/17 Maturity CREDIT AGRICOLE CIB NY COMM PAPER 3/8/2017 Maturity 500, % A-1 3/8/17 Maturity ING (US) FUNDING LLC COMM PAPER 3/8/2017 Maturity 500, % A-1 3/8/17 Maturity ING (US) FUNDING LLC COMM PAPER 3/8/2017 Maturity 2,500, % A-1 3/8/17 Buy BNP PARIBAS NY BRANCH COMM PAPER 9/5/2017 BNP Paribas 2,500, % A-1 3/9/17 Maturity BNP PARIBAS NY BRANCH COMM PAPER 3/9/2017 Maturity 2,500, % A-1 3/9/17 Maturity BNP PARIBAS NY BRANCH COMM PAPER 3/9/2017 Maturity 2,500, % A-1 3/9/17 Buy CREDIT AGRICOLE CIB NY COMM PAPER 9/5/2017 Credit Agricole 1,000, % A-1 3/9/17 Buy BNP PARIBAS NY BRANCH COMM PAPER 10/2/2017 BNP Paribas 1,000, % A-1 3/15/17 Sell US TREASURY NOTES 12/31/2017 BNP Paribas 930, % AA+ 3/15/17 Sell US TREASURY NOTES 1/31/2018 BNP Paribas 2,000, % AA+ 3/15/17 Buy US TREASURY NOTES 3/31/2020 Morgan Stanley & Co. Inc. 2,930, % AA+ 1. Does not include transactions in the LGIP and bank accounts PFM 7

10 Investment Report - Quarter Ended March 31, 2017 City of Salem Combined Portfolio Holdings by Maturity Issuer CUSIP Par Value 1 Maturity Date 1. End of quarter trade-data par values of portfolio holdings; rounded to nearest dollar. 2. End of quarter trade-data market values of portfolio holdings including accrued interest; rounded to nearest dollar. 3. LGIP yield is provided by OSTF website. U.S. Bank yield (before fees) is provided by the City. Call Date S&P Rating Market Value 2 Yield to Maturity 3 LGIP - City - 47,384,454-47,384, % LGIP - URA - 38,760,885-38,760, % U.S. Bank - 25,662,619-25,662, % General Electric Co 36962G5W0 2,500,000 4/27/2017 AA- 2,526, % Canadian Imperial Holding Commerical Paper 13607ES59 2,500,000 5/5/2017 A-1 2,497, % Toyota Motor Corp 89233GS56 2,500,000 5/5/2017 A-1+ 2,497, % Rabobank Nederland NV NY 21687AS87 2,500,000 5/8/2017 A-1 2,497, % JP Morgan Chase & Co 46640PS87 2,500,000 5/8/2017 A-1 2,497, % Credit Agricole NY 22533TSB3 5,000,000 5/11/2017 A-1 4,994, % Bank of Tokyo Mitsubishi NY 06538BSS3 2,500,000 5/26/2017 A-1 2,496, % Credit Agricole CIB NY 22533TSS6 2,500,000 5/26/2017 A-1 2,496, % Bank of Montreal Chicago Commercial Paper 06366GT25 2,500,000 6/2/2017 A-1 2,495, % Bank of Montreal Chicago Commercial Paper 06366GT25 2,500,000 6/2/2017 A-1 2,495, % Bank of Montreal Chicago Commercial Paper 06366GT25 675,000 6/2/2017 A-1 673, % BNP Paribals NY 09659BT75 2,250,000 6/7/2017 A-1 2,245, % Bank of Tokyo Mitsubishi NY 06538BT94 3,000,000 6/9/2017 A-1 2,993, % Toyota Motor Corp 89233GVU7 2,000,000 8/28/2017 A-1+ 1,990, % Bank of Tokyo Mitsubishi NY 06538BVW0 2,500,000 8/30/2017 A-1 2,486, % BNP Paribals NY 09659BW55 2,500,000 9/5/2017 A-1 2,485, % Credit Agricole NY 22533TW51 1,000,000 9/5/2017 A-1 994, % JP Morgan Securities LLC 46640PW82 4,750,000 9/8/2017 A-1 4,725, % Federal Home Loan Mortgage Corporation 3137EADL0 225,000 9/29/2017 AA+ 225, % BNP Paribals NY 09659BX21 1,000,000 10/2/2017 A-1 993, % Johnson & Johnson BL7 1,560,000 11/21/2017 AAA 1,564, % Federal National Mortgage Association 3135G0RT2 255,000 12/20/2017 AA+ 255, % Continued on next page PFM 8

11 Investment Report - Quarter Ended March 31, 2017 City of Salem Combined Portfolio Holdings by Maturity (continued) Issuer CUSIP Par Value 1 Maturity Date Call Date S&P Rating Market Value 2 Yield to Maturity 3 IBM Corp HZ7 2,500,000 2/6/2018 AA- 2,500, % Exxon Mobil Corp 30231GAL6 2,500,000 3/6/2018 AA+ 2,500, % U.S. Treasury UU2 7,500,000 3/31/2018 AA+ 7,475, % U.S. Treasury UZ1 5,500,000 4/30/2018 AA+ 5,485, % U.S. Treasury UZ1 5,750,000 4/30/2018 AA+ 5,735, % Apple Inc Global Notes AJ9 2,500,000 5/3/2018 AA+ 2,502, % Berkshire Hathaway Inc BW0 3,000,000 5/15/2018 AA 3,013, % Federal Home Loan Bank 3130A8PK3 4,125,000 8/7/2018 AA+ 4,097, % Federal Home Loan Bank 3130A8PK3 750,000 8/7/2018 AA+ 745, % Federal Home Loan Bank 3130A9AE1 5,000,000 10/1/2018 AA+ 4,992, % U.S. Treasury WD8 3,700,000 10/31/2018 AA+ 3,722, % Microsoft Corp BF0 1,845,000 11/3/2018 AAA 1,854, % U.S. Treasury A34 5,250,000 11/30/2018 AA+ 5,275, % U.S. Treasury N63 2,195,000 1/15/2019 AA+ 2,195, % Wells Fargo & Co BFQ8 2,500,000 1/15/2019 A 2,524, % Federal National Mortgage Association 3135G0J53 5,000,000 2/26/2019 AA+ 4,972, % Federal Home Loan Mortgage Corporation 3137EADZ9 5,000,000 4/15/2019 AA+ 5,001, % U.S. Treasury D23 5,000,000 4/30/2019 AA+ 5,068, % Inter-American Development Bank DX7 1,750,000 5/13/2019 AAA 1,739, % Chevron Corp BH2 2,000,000 5/16/2019 AA- 2,005, % 1. End of quarter trade-data par values of portfolio holdings; rounded to nearest dollar. 2. End of quarter trade-data market values of portfolio holdings including accrued interest; rounded to nearest dollar. 3. LGIP yield is provided by OSTF website. U.S. Bank yield (before fees) is provided by the City. 4. Wells Fargo & Co is rated AA- by Fitch and is in compliance with the City s investment policy and Oregon Revised Statutes. Continued on next page PFM 9

12 Investment Report - Quarter Ended March 31, 2017 City of Salem Combined Portfolio Holdings by Maturity (continued) Issuer CUSIP Par Value 1 Maturity Date Call Date S&P Rating Market Value 2 Yield to Maturity 3 Toyota Motor Credit Corp 89236TDE2 2,750,000 5/20/2019 AA- 2,742, % Coca-Cola Co BV1 1,335,000 5/30/2019 AA- 1,335, % Federal Home Loan Bank 3130A8DB6 5,000,000 6/21/2019 AA+ 4,987, % Federal Home Loan Mortgage Corporation 3137EAEB1 5,000,000 7/19/2019 AA+ 4,947, % Federal National Mortgage Association 3135G0N33 3,200,000 8/2/2019 AA+ 3,163, % Federal Home Loan Bank 3130A8Y72 3,200,000 8/5/2019 AA+ 3,163, % African Development Bank 00828EBQ1 975,000 9/20/2019 AAA 963, % Federal Home Loan Bank 3130A9EP2 3,450,000 9/26/2019 AA+ 3,412, % Federal National Mortgage Association 3135G0T29 6,000,000 2/28/2020 AA+ 5,993, % U.S. Treasury UV0 2,930,000 3/31/2020 AA+ 2,896, % U.S. Treasury L99 6,500,000 10/31/2020 AA+ 6,466, % Total Market Value PFM Managed Funds $162,920,000 $162,608, % LGIP $86,145,339 $86,145, % Bank Balances $25,662,619 $25,662, % Total Market Value All Funds $274,727,958 $274,416, % 1. End of quarter trade-data par values of portfolio holdings; rounded to nearest dollar. 2. End of quarter trade-data market values of portfolio holdings including accrued interest; rounded to nearest dollar. 3. LGIP yield is provided by OSTF website. U.S. Bank yield (before fees) is provided by the City. PFM 10

13 Managed Account Detail of Securities Held For the Month Ending March 31, 2017 CITY OF SALEM LONG-TERM PORTFOLIO Security Type/Description S&P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date/Coupon/Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value U.S. Treasury Bond / Note US TREASURY NOTES DTD 04/01/ % 03/31/ UU2 7,500, AA+ Aaa 02/26/15 02/27/15 7,425, ,475, ,475, US TREASURY NOTES DTD 04/30/ % 04/30/ UZ1 5,500, AA+ Aaa 03/26/15 03/30/15 5,433, , ,476, ,471, US TREASURY NOTES DTD 04/30/ % 04/30/ UZ1 5,750, AA+ Aaa 03/13/15 03/16/15 5,663, , ,719, ,720, US TREASURY NOTES DTD 10/31/ % 10/31/ WD8 3,700, AA+ Aaa 05/09/16 05/11/16 3,741, , ,726, ,702, US TREASURY NOTES DTD 12/02/ % 11/30/ A34 5,250, AA+ Aaa 05/03/16 05/05/16 5,303, , ,285, ,253, US TREASURY N/B DTD 01/15/ % 01/15/ N63 2,195, AA+ Aaa 03/23/16 03/24/16 2,200, , ,198, ,190, US TREASURY NOTES DTD 04/30/ % 04/30/ D23 5,000, AA+ Aaa 05/03/16 05/05/16 5,105, , ,073, ,034, US TREASURY NOTES DTD 04/01/ % 03/31/ UV0 2,930, AA+ Aaa 03/15/17 03/17/17 2,879, ,880, ,896, US TREASURY NOTES DTD 10/31/ % 10/31/ L99 6,500, AA+ Aaa 02/01/17 02/07/17 6,416, , ,419, ,428, Security Type Sub-Total 44,325, ,170, , ,256, ,173, Supra-National Agency Bond / Note INTER-AMERICAN DEVELOPMENT BANK DTD 04/12/ % 05/13/ DX7 1,750, AAA Aaa 04/05/16 04/12/16 1,744, , ,746, ,732, AFRICAN DEVELOPMENT BANK NOTE DTD 09/20/ % 09/20/ EBQ1 975, AAA Aaa 09/14/16 09/20/16 973, , , Security Type Sub-Total 2,725, ,718, , ,720, ,695, Federal Agency Bond / Note 11

14 Managed Account Detail of Securities Held For the Month Ending March 31, 2017 CITY OF SALEM LONG-TERM PORTFOLIO Security Type/Description S&P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date/Coupon/Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value Federal Agency Bond / Note FHLB NOTES DTD 07/08/ % 08/07/ A8PK3 750, AA+ Aaa 08/10/16 08/12/16 747, , , FHLB NOTES DTD 07/08/ % 08/07/ A8PK3 4,125, AA+ Aaa 07/08/16 07/12/16 4,116, , ,119, ,093, FHLB GLOBAL NOTE DTD 08/26/ % 10/01/ A9AE1 5,000, AA+ Aaa 09/02/16 09/08/16 4,996, , ,997, ,970, FNMA BENCHMARK NOTE DTD 02/23/ % 02/26/ G0J53 5,000, AA+ Aaa 05/03/16 05/05/16 5,003, , ,002, ,967, FREDDIE MAC NOTES DTD 03/21/ % 04/15/ EADZ9 5,000, AA+ Aaa 09/02/16 09/08/16 5,020, , ,016, ,975, FHLB GLOBAL NOTE DTD 06/03/ % 06/21/ A8DB6 5,000, AA+ Aaa 07/08/16 07/12/16 5,048, , ,036, ,972, FHLMC REFERENCE NOTE DTD 07/20/ % 07/19/ EAEB1 5,000, AA+ Aaa 07/21/16 07/25/16 4,986, , ,989, ,939, FNMA BENCHMARK NOTE DTD 08/02/ % 08/02/ G0N33 3,200, AA+ Aaa 08/04/16 08/08/16 3,198, , ,198, ,158, FHLB GLOBAL NOTE DTD 08/04/ % 08/05/ A8Y72 3,200, AA+ Aaa 08/04/16 08/08/16 3,196, , ,197, ,158, FHLB GLOBAL NOTES DTD 09/09/ % 09/26/ A9EP2 3,450, AA+ Aaa 10/04/16 10/07/16 3,448, ,448, ,412, FNMA NOTES DTD 02/28/ % 02/28/ G0T29 6,000, AA+ Aaa 02/27/17 02/28/17 5,991, , ,991, ,985, Security Type Sub-Total 45,725, ,753, , ,745, ,377, Corporate Note GENERAL ELECTRIC CAPITAL CORP NOTES DTD 04/27/ % 04/27/ G5W0 2,500, AA- A1 07/09/14 07/16/14 2,576, , ,502, ,501, JOHNSON & JOHNSON CORP NOTES DTD 11/21/ % 11/21/ BL7 1,560, AAA Aaa 11/18/14 11/21/14 1,558, , ,559, ,558,

15 Managed Account Detail of Securities Held For the Month Ending March 31, 2017 CITY OF SALEM LONG-TERM PORTFOLIO Security Type/Description S&P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date/Coupon/Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value Corporate Note IBM CORP NOTES DTD 02/06/ % 02/06/ HZ7 2,500, AA- Aa3 02/03/15 02/06/15 2,492, , ,497, ,496, EXXON MOBIL CORP NOTES DTD 03/06/ % 03/06/ GAL6 2,500, AA+ Aaa 03/04/15 03/06/15 2,500, , ,500, ,498, APPLE INC GLOBAL NOTES DTD 05/03/ % 05/03/ AJ9 2,500, AA+ Aa1 06/04/15 06/09/15 2,475, , ,490, ,492, BERKSHIRE HATHAWAY NOTES DTD 05/15/ % 05/15/ BW0 3,000, AA Aa2 04/24/15 04/28/15 3,020, , ,007, ,998, MICROSOFT CORP NOTES DTD 11/03/ % 11/03/ BF0 1,845, AAA Aaa 10/29/15 11/03/15 1,843, , ,844, ,844, WELLS FARGO & COMPANY NOTES DTD 10/28/ % 01/15/ BFQ8 2,500, A A2 08/23/16 08/25/16 2,549, , ,537, ,513, CHEVRON CORP NOTES DTD 05/16/ % 05/16/ BH2 2,000, AA- Aa2 05/09/16 05/16/16 2,000, , ,000, ,993, TOYOTA MOTOR CREDIT CORP NOTES DTD 05/20/ % 05/20/ TDE2 2,750, AA- Aa3 05/17/16 05/20/16 2,746, , ,747, ,728, COCA-COLA COMPANY CORP NOTES DTD 05/31/ % 05/30/ BV1 1,335, AA- Aa3 05/25/16 05/31/16 1,334, , ,334, ,329, Security Type Sub-Total 24,990, ,095, , ,020, ,953, Commercial Paper BANK OF MONTREAL CHICAGO COMM PAPER % 06/02/ GT25 2,500, A-1 P-1 09/07/16 09/09/16 2,477, ,494, ,495, BANK TOKYO MITSUBISHI UFJ LTD COMM PAPER % 08/30/ BVW0 2,500, A-1 P-1 02/23/17 02/24/17 2,482, ,485, ,486, BNP PARIBAS NY BRANCH COMM PAPER DTD 03/08/ % 09/05/ BW55 2,500, A-1 P-1 03/08/17 03/09/17 2,484, ,486, ,485,

16 Managed Account Detail of Securities Held For the Month Ending March 31, 2017 CITY OF SALEM LONG-TERM PORTFOLIO Security Type/Description S&P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date/Coupon/Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value Commercial Paper Security Type Sub-Total 7,500, ,443, ,466, ,467, Managed Account Sub-Total 125,265, ,182, , ,209, ,668, Securities Sub-Total Accrued Interest Total Investments $125,265, $125,182, % $369, $125,209, $124,668, $369, $125,037,

17 Managed Account Detail of Securities Held For the Month Ending March 31, 2017 CITY OF SALEM STREETS & BRIDGES GO BONDS Security Type/Description S&P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date/Coupon/Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value Federal Agency Bond / Note FREDDIE MAC GLOBAL NOTES DTD 08/10/ % 09/29/ EADL0 225, AA+ Aaa 03/24/14 03/25/14 223, , , FANNIE MAE GLOBAL NOTES DTD 10/30/ % 12/20/ G0RT2 255, AA+ Aaa 03/24/14 03/25/14 250, , , Security Type Sub-Total 480, , , , Commercial Paper BANK OF MONTREAL CHICAGO COMM PAPER % 06/02/ GT25 675, A-1 P-1 09/07/16 09/09/16 668, , , CREDIT AGRICOLE CIB NY COMM PAPER DTD 03/08/ % 09/05/ TW51 1,000, A-1 P-1 03/09/17 03/10/17 994, , , BNP PARIBAS NY BRANCH COMM PAPER DTD 01/04/ % 10/02/ BX21 1,000, A-1 P-1 03/09/17 03/10/17 992, , , Security Type Sub-Total 2,675, ,655, ,661, ,661, Managed Account Sub-Total 3,155, ,129, ,140, ,141, Securities Sub-Total Accrued Interest Total Investments $3,155, $3,129, % $ $3,140, $3,141, $ $3,141,

18 Managed Account Fair Market Value & Analytics For the Month Ending March 31, 2017 CITY OF SALEM SHORT TERM PORTFOLIO Security Type/Description Next Call Market Market Unreal G/L Unreal G/L Effective Duration YTM Dated Date/Coupon/Maturity CUSIP Par Broker Date Price Value On Cost Amort Cost Duration to Worst at Mkt Commercial Paper CANADIAN IMPERIAL HOLDING COMM PAPER % 05/05/ ES59 2,500, CIBC ,497, , TOYOTA MOTOR CREDIT CORP COMM PAPER % 05/05/ GS56 2,500, TOYOTA ,497, , COOPERATIEVE RABOBANK U.A. COMM PAPER % 05/08/ AS87 2,500, RABOBANK ,497, , JP MORGAN SECURITIES LLC COMM PAPER % 05/08/ PS87 2,500, JPMCHASE ,497, , CREDIT AGRICOLE CIB NY COMM PAPER DTD 12/15/ % 05/11/ TSB3 5,000, CREDAG ,994, , BANK TOKYO-MIT UFJ NY COMM PAPER DTD 09/01/ % 05/26/ BSS3 2,500, BTM ,496, , CREDIT AGRICOLE CIB NY COMM PAPER % 05/26/ TSS6 2,500, CREDAG ,496, , (48.33) BANK OF MONTREAL CHICAGO COMM PAPER % 06/02/ GT25 2,500, BMO ,495, , , BNP PARIBAS NY BRANCH COMM PAPER DTD 12/14/ % 06/07/ BT75 2,250, BNP_PARI ,245, , BANK TOKYO-MIT UFJ NY COMM PAPER DTD 12/15/ % 06/09/ BT94 3,000, BTM ,993, , , TOYOTA MOTOR CREDIT CORP COMM PAPER % 08/28/ GVU7 2,000, TOYOTA ,990, , JP MORGAN SECURITIES LLC COMM PAPER DTD 12/12/ % 09/08/ PW82 4,750, JPM_CHAS ,725, , , Security Type Sub-Total 34,500, ,428, , , Managed Account Sub-Total 34,500, ,428, , ,

19 Managed Account Detail of Securities Held For the Month Ending March 31, 2017 CITY OF SALEM SHORT TERM PORTFOLIO Security Type/Description S&P Moody's Trade Settle Original YTM Accrued Amortized Market Dated Date/Coupon/Maturity CUSIP Par Rating Rating Date Date Cost at Cost Interest Cost Value Security Type Sub-Total 34,500, ,260, ,419, ,428, Managed Account Sub-Total 34,500, ,260, ,419, ,428, Securities Sub-Total Accrued Interest Total Investments $34,500, $34,260, % $0.00 $34,419, $34,428, $0.00 $34,428,

20 City of Salem Agenda item: 5a City of Salem Finance Committee Current Finance Activity June 26,

21 City of Salem Current Finance Activity Manage Utility Fund debt 2009 OECDD Loan Payoff $4,791,684 Remove FF&C pledge from General Fund 2009 Utility Revenue Bond Refunding $7,820,380 Savings $56,230,000 Manage debt load for City and URA- Start building capacity 2013 West Salem URA Loan Payoff 2012 GO Fire Series Refunding 2015 Riverfront Downtown URA Loan Payoff $623,203 $153,243 $2,475,000 Pay down 2017 Du Jour Financing $5,700,000 Current GO Issuance 2017 GO Public Safety Facility Bond 2009 GO S&B Refunding $1,089,171 Savings $18,195,000 $61,800, GO Library Bond $15,300,000 2

22 City of Salem Current Finance Activity Due Date Mon., April 17 Fri., May 5 Mon., May 22 Tues., May 23 Mon., June 5 Tues., June 6 Wk. of June 12 Fri., June 16 Wed., June 21 Thurs., June 29 Wed., July 5 Tues., July 18 City of Salem Water and Sewer Revenue Refunding Bonds, Series 2017 Event Second draft POS circulated Due diligence call, Rating Prep Call Conference call with Rating Agency (Moody's) Treasury approval of Preliminary Refunding Plan Final comments on POS, Deemed Final letter, Receive rating 30 - day remonstrance period end Bid Opening at 9:30 am - OMS bidding period; Receive escrow verification Final Official Statement posted Closing Preliminary Schedule of Events; as of April 18, 2017 Circulate schedule and distribution list First Draft Preliminary Official Statement and Notice of Sale circulated Council Adopts Authorizing Ordinance (1st and 2nd Readings) 3

23 City of Salem Current Finance Activity 4

24 City of Salem Current Finance Activity 5

25 City of Salem Current Finance Activity 6

26 City of Salem Current Finance Activity Due Date Tues., May 30 Fri., June 16 Mon., June 26 Fri., June 30 Wk. of July 10 Thurs., July 13 Wk. of July 17 Wk. of July 17 Thurs., July 27 Thurs., August 10 Tues., August 15 Thurs., Aug 24 City of Salem General Obligation and Refunding Bonds, Series 2017 Event Second draft POS circulated Treasury approval of Preliminary Advance Refunding Plan Substantially complete draft POS and "Deemed Final" letter circulated Due diligence call Conference call with Rating Agency Final comments on POS, Deemed Final letter, Receive rating Bid Opening at 9:30 am - OMS bidding period; Receive escrow verification Final Official Statement posted Closing Preliminary Schedule of Events; as of May 31, 2017 Circulate schedule and distribution list First Draft Preliminary Official Statement and Notice of Sale circulated Council Adopts Authorizing Resolution 7

27 City of Salem Current Finance Activity 8

28 City of Salem Current Finance Activity 10 Year Simple Example - Investor Perspective Bond Coupon Initial Bond Price Total Coupon Payment Value at Maturity Total Cash Flow (Coupon minus Premium) Priced at Par Value 3.00% $ $30.00 $ $30.00 Priced at Premium 4.00% $ $40.00 $ $

29 City of Salem Current Finance Activity 10 Year Simple Example - Issuer Perspective Bond Principal Amount Interest Rate Interest Expense Premium Total Proceeds Priced at Par Value $10,000, % $1,648,835 none $10,000,000 Priced at Premium $10,000, % $2,230,914 $1,000,000 $11,000,000 Difference $582,079 $1,000,000 $417,921 Results in a True Interest Cost (TIC) of approximately 3.65% on $11M in Total Proceeds 10

30 City of Salem Current Finance Activity 11

31 City of Salem Current Finance Activity 12

32 U.S. PUBLIC FINANCE CREDIT OPINION 16 June 2017 New Issue Salem (City of) OR Water & Sewer Enterprise New Issue - Moody's Assigns Aa2 to Salem (City of) OR Water & Sewer Enterprise's Revenue Refunding Bonds Summary Rating Rationale Moody's Investors Service has assigned a Aa2 rating to Salem (City of) Oregon Water & Sewer Enterprise's Water and Sewer Revenue Refunding Bonds, Series 2017 expected to be issued in the amount of $56.2 million. This is the only rated debt of the enterprise. Contacts Sam Feldman Crough Analyst samuel.feldman@moodys.com The Aa2 underlying rating reflects the system's large size, moderate socioeconomic levels, healthy debt service coverage, ample liquidity, and low leverage post-issuance. The rating further incorporates healthy management that has raised rates steadily, strong capital planning, a standard rate covenant of 1.25-times, and the lack of a debt service reserve fund. Dan Steed AVP-Analyst dan.steed@moodys.com Credit Strengths » Stable customer base that includes the state capitol» Strong financial position supported by solid management» Steady and consistent rate increases have built healthy net revenues Credit Challenges» Moderate socioeconomic profile Rating Outlook Outlooks are usually not assigned to local governments with this amount of debt outstanding. Factors that Could Lead to an Upgrade» Significant improvement in coverage and lower leverage» Material improvement in socioeconomic profile Factors that Could Lead to a Downgrade» Decline in coverage and increased leverage» Substantial decline in available liquidity

33 U.S. PUBLIC FINANCE MOODY'S INVESTORS SERVICE Key Indicators Exhibit 1 Salem (City of) OR Water & Sewer Enterprise System Characteristics Asset Condition (Net Fixed Assets / Annual Depreciation) System Size - O&M (in $000s) 36 years 54,426 Service Area Wealth: MFI % of US median 85.80% Legal Provisions Rate Covenant (x) 1.25x Debt Service Reserve Requirement No DSRF Financial Strength Operating Revenue ($000) System Size - O&M (in $000s) Net Funded Debt ($000) Annual Debt Service Coverage (x) Cash on Hand Debt to Operating Revenues (x) ,029 74,341 84,161 87,936 90,730 42,645 44,397 53,322 53,486 54, , , , , , x 1.25x 1.26x 1.78x 1.71x 268 days 273 days 215 days 224 days 272 days 2.9x 2.6x 2.0x 1.8x 1.5x Note: Annual Debt Service Coverage combines debt service for all obligations paid by net revenues. Source: Moody's Investors Service Recent Developments Recent developments are incorporated into the Detailed Rating Considerations. Detailed Rating Considerations Service Area and System Characteristics: Stable Customer Base Serving State Capitol The combined water, sewer and stormwater utility primarily serves a residential customer base in Salem, OR (Aa2) and portions of the surrounding area. Located 45 miles south of Portland, OR (Aaa Stable), Salem is the state's third largest city, with an economy primarily based on employment in government, agriculture, food processing, wood and paper products, and light manufacturing. City management reports continued growth in light industry, particularly food processing. The area's socioeconomic profile is relatively modest, with median family income of 85.8% of the national median. Unemployment is low at 3.7% as of April 2017, which is similar to the state rate (3.5%) and slightly lower than the national rate (4.1%). We expect the local economy to remain healthy, anchored by the stabilizing presence of the state capitol. Serving a population of approximately 193,000 through 52,700 customer accounts, the water system serves the City of Salem, the City of Turner, Suburban East Salem Water District, the Jan Ree Area, and Orchard Heights Water District. Average base water use is 20 million gallons, with peak usage of 45 million gallons. The system has plenty of supply to meet demand, with five certified water rights totaling 147 million gallons per day on the North Santiam River, as well as unused water rights to the Willamette River. Water is treated using a slow-sand filtration plant located on the North Santiam River. Additionally, 15 wells are available in the case of emergency, four of which are used for aquifer storage and recovery. There is no substantial concentration among customers, with the largest three customers (by revenue) being Suburban East Salem Water (2.7%), State of Oregon Corrections (2.6%), and Salem-Keizer School District (1.7%); total concentration among the largest 10 customers is a reasonable 10.4%. The wastewater system serves a larger estimated population of 232,855 through 63,320 accounts in a greater area that includes the cities of Salem, Turner, Keizer, as well as three other service areas. The Willow Lake Water Pollution Control Facility provides dryweather capacity of 35 mgd and wet-weather capacity of 150 mgd. A second facility, River Road Wet Weather Treatment Facility, provides an additional 50 mgd of treatment capacity during the winter months, when precipitation is highest. Peak demand is This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history June 2017 Salem (City of) OR Water & Sewer Enterprise: New Issue - Moody's Assigns Aa2 to Salem (City of) OR Water & Sewer Enterprise's Revenue Refunding Bonds

34 MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE approximately 200 mgd during severe storms. Even during the record-breaking precipitation season in Oregon this winter, the system's capacity was sufficient to meet effluent discharge permit standards. Minor concentration exists with the City of Keizer representing 12% of total wastewater revenues, though the treatment plant is located next to the City of Keizer and the contract is long-term and stable. Other major customers include State of Oregon Corrections (3.4%), Norpac Foods (1.8%) and Oregon Cherry Growers (1.5%). The top 10 customers represent a somewhat elevated 22.75% of gross wastewater revenue, however the stability of the largest customer is a notable strength, and other major customers also provide stable revenue. Serving city of Salem residents, the stormwater system has 43,625 accounts that are charged based on a base account charge and an impervious area charge, both implemented starting in 2013 when the stormwater and sewer systems were separated financially. Stormwater is held in five regional detention facilities that are fed by 13 urban watersheds. The city does not treat stormwater, though it is responsible for a discharge quality monitoring program. The system's largest customer by revenue is the Salem-Keizer School District at 1.8%, with all remaining customers under 1% of revenues and the top 10 customers representing just 5.8% of revenues. Debt Service Coverage and Liquidity: Solid Financial Performance with Strong Coverage Supported by Frequent Rate Increases Annual debt service coverage is strong at 1.7-times in 2016, using a conservative calculation that includes all debt paid by the utility system. Senior lien coverage alone was a stronger 2.78-times in This issuance will be a senior-lien obligation, and it is refunding debt that had the Full Faith and Credit (FF&C) pledge of the city's general fund but was paid using net revenues. Even with the inclusion of this debt in senior-lien coverage calculation, steady rate increases, healthy long-range financial planning, and strong management are expected to keep coverage at or near 2-times, with lowest projected coverage in 2020 at 1.7-times. Maximum annual debt service is in 2020 at $18 million, and coverage is 1.9-times using 2016 net revenues. The city prepares a financial plan and rate proposal for the utility fund every two years, in even-numbered years. Rates have increased between 2% and 6% every year for the combined utility since 2012, with a multiyear decrease in the sewer rate from as the stormwater system was separated into its own set of charges. Rate increases are already adopted for all three systems for January 1, Even with the steady increases, management reports that rates remain average compared to peers in Oregon. Adopted by the City Council in April 2014 and updated in December 2016, strong financial policies aim to provide predictable and stable rate and cost of service information and healthy utility fund financials with ample reserves. The utility's transfers to other city funds are largely for services provided to the utility by other funds. There are two small interfund loans of $3.3 million combined from the Utility Fund to the General Fund for parking meter equipment and streetlights; the utility fund is expected to be paid in full, with interest in six years (parking meters) or streetlights (10 years). We expect continued stable financials from the utility, with no future borrowing plans that will reduce coverage and steady rate increases to pay for operations, debt service and capital plans. The customer base is healthy and growing manageably, which is further stabilized by the presence of the Oregon State Capital and the growth of light industry and food processing. LIQUIDITY Total liquidity in the utility fund is strong at 272 days cash-on-hand as of audited 2016 financials. This includes a rate stabilization fund of $6.9 million. Debt and Legal Covenants: Low Leverage and Standard Legals Define the Healthy Debt Profile Post-issuance, the utility will have $105.2 million in debt, all of it senior-lien obligations paid from net revenues of the utility fund. At 1.2-times operating revenues, leverage is relatively modest for a system of this size. Management reports a desire to rely more on cashfunded capital programs and does not have plans to issue utility debt in the next five years. Legal features are satisfactory and standard, with a rate covenant of 1.25-times annual debt service and an additional bonds test of 1.25-times maximum annual debt service. Given the system's abundant liquidity, we do not view the lack of a debt service fund as a significant credit weakness. DEBT STRUCTURE Final maturity for the existing parity revenue bonds is 2025, and the new issuance is expected to have final maturity of The relatively rapid payout is positive for debt capacity and leverage in future years June 2017 Salem (City of) OR Water & Sewer Enterprise: New Issue - Moody's Assigns Aa2 to Salem (City of) OR Water & Sewer Enterprise's Revenue Refunding Bonds

35 U.S. PUBLIC FINANCE MOODY'S INVESTORS SERVICE DEBT-RELATED DERIVATIVES No debt-related derivatives. Management and Governance Management engages in multi-year financial, operational and capital planning and has steadily increased rates to pay for operations, debt service and capital planning. The utility is managed by the City of Salem, OR, which has the council-manager form of government and is overseen by a nine-member City Council, including the Mayor. The City Manager appoints the heads of all city departments, including the utility. Rates are set by the City Council in a biennial process and do not have any regulatory limits or review process. The system is in full compliance with all regulations, permit conditions, and environmental rules. Legal Security The bonds are secured by a senior lien on utility fund revenues that is subordinate only to operating and maintenance expenses of the systems. Use of Proceeds Proceeds will be used to refund Full Faith & Credit Bonds, Series Obligor Profile Located 45 miles south of Portland, OR, Salem is the state's third largest city, with a population of approximately 162,000. The city is the state capital of Oregon and the county seat of Marion County. Methodology The principal methodology used in this rating was US Municipal Utility Revenue Debt published in December Please see the Rating Methodologies page on for a copy of this methodology. Ratings Exhibit 2 Salem (City of) OR Water & Sewer Enterprise Issue Rating Water and Sewer Revenue Refunding Bonds, Series 2017 Rating Type Sale Amount Expected Sale Date Rating Description Aa2 Underlying LT $56,230,000 06/29/2017 Revenue: Government Enterprise Source: Moody's Investors Service 4 16 June 2017 Salem (City of) OR Water & Sewer Enterprise: New Issue - Moody's Assigns Aa2 to Salem (City of) OR Water & Sewer Enterprise's Revenue Refunding Bonds

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