OFFICE OF THE CITY ADMINISTRATIVE MANAGEMENT City Hall Holland, Michigan

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1 OFFICE OF THE CITY ADMINISTRATIVE MANAGEMENT City Hall Holland, Michigan City Administrative Management Report 12E4.1 CONSENT To: Mayor De Boer and Members of the Holland City Council Date: February 1, 2017 Subject: Finance Department Fiscal Year 2016 Annual Investment Report Strategy: VII: Organization Summary In compliance with the City of Holland s Investment policy as updated on December 16, 1998, the attached annual report is presented to Council. The policy indicates the following prioritized objectives for the Investment program: Safety Diversification Liquidity Return on Investment The policy delegates the Finance Officer / Treasurer as the Investment Officer for the City, excluding those funds administered by the Holland Board of Public Works. In addition to this annual investment report, quarterly reports are submitted and accepted by Council in accordance with state law. The City s Investment program is an important financial function. In Fiscal Year 2016, the average daily balance of $29,952,997 (excluding the BPW funds) compared to $30,600,108 in FY15, was available for investment. The City earned $239,451 interest compared to $209,491 in FY15. The overall interest rate earned for fiscal year 2016 was.799% compared to prior year at 0.685%. The investment report submitted by the Finance Director also lists the following: Schedule of short-term security acquisitions; Listing of long-term securities held on June 30, 2016; Fund allocation of long-term securities;

2 Historical trend of City interest earnings; Summary of credit card transaction use; and the Listing of all approved financial institution accounts. Recommendation It is recommended that the Fiscal Year 2016 Cash and Investment Portfolio Performance and Status Report as prepared by the Finance Department be accepted. Respectfully submitted, Ryan Cotton Attachments: Cash and Investment Portfolio Performance and Status Report Report prepared by: Tim Vagle

3 Cash and Investment Portfolio Performance and Status Report To City Council and City Manager For The Fiscal Year July 1, 2015 June 30, 2016 Submitted By: City Finance / Treasurer s Office February 1, 2017

4 Cash & Investment Portfolio Performance & Status Report FY2016 Table of Contents P a g e N u m b e r s Narrative Report of Cash & Investments 3-6 Portfolio Status Report at Fiscal Year-End (June 30, 2016) 7 Summary Report of Portfolio Average Balances & Investment Earnings FY Detail Report of Long-term Securities at Fiscal Year-end (June 30, 2016) 9-10 Detail Listing of Certificates of Deposit Held at Fiscal Year-end (June 30, 2016) 11 Detail Schedule of Certificates of Deposit Acquisitions Throughout Fiscal Year: from Chemical Bank 12 from First Merit Bank 13 from Flagstar Bank 14 from Mercantile Bank 15 from West Michigan Community Bank 16 Multi-Year Graphs and Overview of History and Trends: Seven-Year History & Trend of Market Interest Rates 17 Five-Year Overview of Investment Earnings & Market Value Adjustments 18 Ten-Year Overview of Trends in Investment Earnings Dollars 19 Five-Year Overview of Average Daily Balances and Investment Earnings 20 Overview of Investment Returns 21 Credit / Debit Card Receipting: by Transaction Volume 22 by Transaction Dollars 23 Listing of Approved Financial Institution Accounts 24-28

5 Fiscal Services Department Tim Vagle, Director Date: February 1, 2017 Re: ANNUAL CASH & INVESTMENT REPORT: FISCAL YEAR 2016 CONTENT OF THIS REPORT INTRODUCTION In accordance with provisions of the City of Holland's Cash & Investment Policy, presented herein is the Annual Cash & Investment Performance and Status Report for fiscal year ended June 30, In addition to this narrative, the report includes table and graph presentations of the following: Status of Cash and Investment Portfolio at fiscal year-end (June 30, 2016). Status of Certificates of Deposit at June 30, Certificates of Deposit Transactions throughout the fiscal year July 2015 thru June Status of Long-Term Securities at June 30, Average Daily Portfolio Balance, Investment Income, and Rate of Return FY2016. Line-Graphs and Bar-Graphs providing history and trend analysis. Summary of Credit/Debit Card Receipting for the past two fiscal years. Listing of All Existing Accounts With Financial Institutions. INVESTMENT PORTFOLIO INFORMATION Portfolio Composition Through most of the fiscal year, between 17% and 44% of the total portfolio was invested in government securities. These securities have a longer-term duration to maturity (one to five years), providing slightly higher rates of return, instant liquidity capabilities, and a high level of safety. Two different firms were utilized to purchase longer-term securities: UBS Financial Services, Inc and Morgan Stanley. The remaining portion of the portfolio (between 56% to 83%) consisted primarily of shorter-term securities in the form of certificates of deposit (up to three year maturities) and money-market accounts.

6 Page 2 of 4 February 1, 2017 INVESTMENT PORTFOLIO INFORMATION ( c o n t i n u e d ) LONG-TERM SECURITIES Governmental reporting standards require marketable securities to be presented at market values (referred to as, 'mark-to-market'). Values of marketable securities with fixed interest rates tend to move in an inverse relationship to the open market interest rate environment: rising interest rate environment = market value of fixed rate securities generally declines falling interest rate environment = market value of fixed rate securities generally rises. The interest rate market environment for one-to-five year securities was up and down this fiscal year. For FY16, the city ended with a large increase in market value over the entire portfolio. In FY16 the City continued with mostly Municipal Bond pieces. SHORT-TERM SECURITIES Throughout the fiscal year, a relatively constant percentage of the City's total portfolio was maintained in short-term securities to meet the current or near-term requirements for day-to-day operations. This portion of the overall portfolio saw a slight uptick in interest rates toward the end of the fiscal year. The type of securities acquired for short-term investments included Certificates of Deposit, as well as Money Market Accounts. INVESTMENT PERFORMANCE FOR TOTAL PORTFOLIO Fiscal Year 2015 Fiscal Year 2016 Average Daily Balance $ 30,600,108 $ 29,952,997 Annualized Rate of Return 0.685% 0.799% Annual Interest Earnings $ 209,491 $ 239,451 A summary schedule is attached that provides additional detail. COMPLIANCE WITH CASH & INVESTMENT POLICY All cash and investment securities were transacted within the scope of items authorized by the Investment Policy. There were neither discrepant nor unusual transactions events to report.

7 Page 3 of 4 February 1, 2017 CREDIT/ DEBIT CARD RECEIPTING CREDIT / DEBIT CARDS - RECEIPTING Comparison of fiscal year to prior fiscal year : FY 2015 FY 2016 Credit/Debit Card Receipting - Transactions 14,507 17,273 Credit/Debit Card Receipting - Amounts $ 780,123 $ 803,552 Credit/Debit Card Processing Fees $ 31,519 $ 34,250 Transaction volume increased 19.07% and dollar volumes increased 3.00% compared to the previous fiscal year. Supporting detail is attached. CREDIT CARDS ACCEPTANCE FOR PROPERTY TAXES Property assessments and taxes are available for online inquiry by individual parcel, and the software company (BS&A Software, Inc.) provides a taxpayer the capability to pay property taxes by credit card online (via a third-party vendor service). The fee structure for using this credit card service is absorbed 100% by the taxpayer. The summary schedule below reflects a five year history of this online credit card program. Tax Year Dollar Amount Transaction Count 2011 $140, $162, $139, $137, $142, PSD/DDA DOWNTOWN INTERNET SALES UTILIZING PAYPAL & EVENTBRITE Fiscal Year 2015 Fiscal Year 2016 PAYPAL/STRIPE Transactions Net Amount $ 4,743 $ 8,265 EVENTBRITE Transactions 1, Net Amount $ 55,596 $ 34,374 These transactions are not included in the Credit/Debit Cards receipting summaries above.

8 Page 4 of 4 February 1, 2017 BANKING AFFILIATIONS AND CONSIDERATIONS BANKING SERVICES CONTRACT A contractual agreement was approved by City Council in December 2002, with Fifth Third Bank. This agreement includes bank accounts, online banking, investment transactions, credit card receipting, and credit card disbursements (not presently activated). Since that original agreement, there have been periodic pricing negotiations and agreement extensions. Changes to the purchasing ordinance recommended by the audit committee were implemented that allowed for a competitively negotiated banking contract without requiring a formal banking services request for proposal (RFP) process. The current contract extension is for the period March 1, 2014 through February 28, PROCUREMENT CREDIT CARD DEPARTMENTAL DISBURSEMENTS In FY16 this program expanded into a Corporate/Commercial Credit Card Account with six cards authorized to approved Leadership Team personnel. This program is administered through Fifth Third Bank.

9 C I T Y O F H O L L A N D - C A S H A N D I N V E S T M E N T P O R T F O L I O S T A T U S R E P O R T At Close of Business Day: June 30, 2016 United Other Federal Consumers W MI Financial % Of Cash or Investment Type Fifth Third Macatawa Chemical Mercantile Flagstar Huntington Cr. Union First Merit Cr. Union Comm Arrangements TOTAL Gr Total P O O L E D Short-Term Money Management: - Cash in Bank Dep Acct (a) 1,492, ,492, % - Money Mkt Acct (a) 155, ,002, ,927 1,009,318 1,410,314 4,728, % - MI Class - 0-3,761,215 3,761, % - Commercial Paper % - CDARS Certificates of Dep % - CDARS Accr Interest Rcvb % - Certificates of Deposit (b) , ,712 1,564, ,003, ,000 1,355,092 4,977, % - Accrued Interest Rec'v (886) , ,838 1, , % Total Short-term 1,647, ,504, ,920 1,566, ,927 1,004,024 1,265,183 2,766,432 3,761,215 14,967, % Long-Term Money Management: - Money Market Account ,256 8, % - Certificates of Deposit (b) % - MI Class % - CDARS Certificates of Dep % - CDARS Accr Interest Rcvb % - Commercial Paper - 0-1,158,734 1,158, % - Municipal Bond 8,035,041 8,035, % > Accrued Interest Rec'v 47,638 47, % - U.S. Treasuries / Instrumentalities: > Par Value 2,165,000 2,165, % > Market Value Adj (c) 93,710 93, % > Accrued Interest Rec'v 1,905 1, % Total Long-term ,510,283 11,510, % T O T A L P O O L E D 1,647, ,504, ,920 1,566, ,927 1,004,024 1,265,183 2,766,432 15,271,498 26,478, % S E G R E G A T E D Deposits for Insurance Claims % - - With HUB Insurance Group: > Gen Liability/WorkerComp Claims 30,000 30, % T O T A L S E G R E G A T E ,000 30, % G R A N D T O T A L S 1,647, ,504, ,920 1,566, ,927 1,004,024 1,265,183 2,766,432 15,301,498 26,508, % % of Short-Term Portfolio = 11.00% 0.00% 0.00% 16.73% 2.02% 10.47% 0.00% 1.01% 6.71% 8.45% 18.48% 25.13% % % of Long-Term Portfolio = 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % % Percent of Total Portfolio = 6.21% 0.00% 0.00% 9.45% 1.14% 5.91% 0.00% 0.57% 3.79% 4.77% 10.44% 57.72% % FOOTNOTES: (a) - Of this balance... (b) - C / D's listed under Short-term Money Mgt represent those with an initial maturity of less than 12 months, those listed under Long-term Mgt have initial maturities of at least 2 years. (c) - 'Market Value Adjustment' for marketable securities represents valuation adjustment as of most recent concluded calendar month.

10 CITY OF HOLLAND COMPARATIVE ANALYSIS OF "AVERAGE DAILY CASH & INVESTMENT BALANCE" AND "INVESTMENT INCOME" FOR FISCAL YEARS AND F I S C A L Y E A R F I S C A L Y E A R Average Accrued Capital Market Year-to-Date Average Accrued Capital Market Year-to-Date Daily Interest Gains Write Up Investment Daily Interest Gains Write Up Investment Month Balance Income (Losses) (Down) Income Balance Income (Losses) (Down) Income July 25,057,888 14,647 (16,465) (1,818) 25,598,911 17,787 3,388 21,175 August 47,532,650 18,542 20,588 37,312 47,285,421 22,371 (6,847) 36,699 September 35,365,215 16,836 (11,781) 42,367 37,094,614 21,018 23,859 81,576 October 33,364,991 17,587 21,264 81,218 31,487,801 20,681 (25,749) 76,508 November 32,048,587 17,079 4, ,869 30,167,434 20,315 (31,137) 65,686 December 30,166,756 17,893 (35,768) 84,994 28,686,091 19,236 (32,967) 51,955 January 29,332,912 17,902 49, ,258 26,511,574 19,475 86, ,195 February 29,307,001 16,540 (29,646) 139,152 26,679,660 17,861 (24,952) 151,104 March 28,077,261 19,425 27, ,777 27,546,607 20,399 10, ,731 April 26,716,354 17,733 (6,625) 196,885 26,316,772 20,531 3, ,936 May 25,699,816 18,076 (12,643) 202,318 25,777,551 19,273 12, ,117 June 24,531,862 17,231 (13,654) 205,895 26,283,528 20,504 (37,970) 71, , Months Total 30,600, ,491 0 (3,596) 205,895 29,952, ,451 (37,970) 90, ,175 A n n u a l i z e d I n v e s t m e n t R a t e O f R e t u r n - C u r r e n t F i s c a l Y e a r July 1, June 30, 2016 On Interest Income Only 0.799% On Total Investment Income (Interest, plus Capital Gains and minus Capital Losses) 0.975% A n n u a l i z e d I n v e s t m e n t R a t e O f R e t u r n - P r i o r F i s c a l Y e a r July 1, June 30, 2015 On Interest Income Only 0.685% On Total Investment Income (Interest, plus Capital Gains and minus Capital Losses) 0.673%

11 CITY OF HOLLAND - INVESTMENT CARRYING AND MARKET VALUES AT JUNE 30, 2016 Par Value Market Value at June 30, 2016 U.S. Government Securities, Agencies, Instrumentalities (Rated AAA S&P, Aaa Moody's) Par Value Price Market Value Coupon Effective Interest Interest Maturity Purchased Next City of Holland: Rate Rate Date From Par Value Call Call Features In Safekeeping with UBS or Morgan Stanley: F.H.L.B 1.250% 1.250% 5/23/2019 UBS 1,000, ,000, ,001, F.H.L.M.C % 1.073% 12/17/2018 MS 1,165, /17/2015 1,165, ,182, F.H.L.M.C % 1.667% 6/25/2019 MS #DIV/0! 0.00 Total U.S. Govt. Securities 2,165, ,165, ,183, Commercial Paper - Natixis 0.490% 0.490% 7/22/2016 MS 999, n/a n/a 999, , Commercial Paper - Natixis 0.900% 0.900% 3/3/2017 MS 159, n/a n/a 159, , Municipal Bond - Pinckney 4.899% 2.578% 5/1/2017 UBS 1,018, n/a n/a 1,018, ,030, Municipal Bond - Howell Twp 4.000% 1.650% 5/1/2018 UBS 458, n/a n/a 458, , Municipal Bond - Macomb 3.450% 2.761% 5/1/2018 UBS 505, n/a n/a 505, , Municipal Bond - Warren 4.250% 2.951% 4/1/2019 UBS 206, n/a n/a 206, , Municipal Bond - Macomb 4.050% 3.550% 5/1/2020 UBS 152, n/a n/a 152, , Municipal Bond - Lincoln Pk 5.000% 1.720% 5/1/2017 UBS 256, n/a n/a 256, , Municipal Bond - Imlay City 3.950% 2.426% 5/1/2018 UBS 267, /01/ , , Municipal Bond - Van Dyke 5.150% 3.010% 5/1/2019 MS 200, n/a n/a 200, , Municipal Bond - St Johns 1.700% 1.486% 5/1/2018 UBS 481, n/a n/a 481, , Municipal Bond - Mich St 3.279% 1.010% 11/1/2017 MS 102, n/a n/a 102, , Municipal Bond - S Lyon 1.580% 1.304% 5/1/2018 UBS 251, n/a n/a 251, , Municipal Bond - East GR 1.180% 1.030% 5/1/2017 MS 500, n/a n/a 500, , Municipal Bond - St Johns 2.100% 1.973% 5/1/2019 MS 431, n/a n/a 431, , Municipal Bond - Mich St 3.890% 1.150% 11/1/2018 UBS 106, n/a n/a 106, , Municipal Bond - Otsego 1.650% 1.401% 5/1/2019 MS 770, n/a n/a 770, , Municipal Bond - Van Dyke 5.300% 2.446% 5/1/2020 MS 187, n/a n/a 187, , Municipal Bond - Orchard View 1.730% 1.476% 5/1/2018 MS 286, n/a n/a 286, , Municipal Bond - Monroe Co 2.400% 1.850% 5/1/2019 MS 101, n/a n/a 101, , Municipal Bond - Montague Sch 2.084% 1.893% 5/1/2020 UBS 503, n/a n/a 503, , Municipal Bond - Lincoln Cons 2.003% 1.690% 5/1/2019 MS 479, n/a n/a 479, , Municipal Bond - Montague Sch 2.084% 1.673% 5/1/2020 MS 253, n/a n/a 253, , Municipal Bond - Lincoln Cons 2.420% 1.861% 5/1/2021 MS 512, n/a n/a 512, , Total 11,358, ,358, ,452, Difference - Market Compared to Par Value 93, Loss from two called Wayne Co bonds (37,970.40) Variance to General Ledger Market Allowance Balance Balance = 3, , (=adjustment FY16) Other Long-Term Monies - CD's $0.00 Bank Ratings Key Superior ***** $ Total in Long Term CD's Sound **** Performing *** Below Average ** Weak * Other Long-Term Financial Arrangements Morgan Stanley Money Mkt $8, Chemical Bank Money Mkt

12 $1,000, Subtotal Long-Term Not in Government Agencies: $1,008, % Grand Total Par Value Long-Term $12,367, Other Financial Arrangements - Segregated - Non-Pool (Bond Proceeds) None

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19 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun SEVEN YEAR RECENT HISTORY OF INTEREST RATES FOR REPRESENTATIVE SECURITIES IN THE OPEN FINANCIAL MARKETS ( MATURITIES OF 6 MONTHS, 2 YEARS AND 10 YEARS ) 10 Year T Note Rate 2 Year T Note Rate 6 Month CP Rate INTEREST RATE PERCENTAGE

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21 CITY OF HOLLAND POOLED FUNDS OVERVIEW OF TRENDS IN INVESTMENT EARNINGS DOLLARS 2,400,000 2,200,000 2,000,000 1,800,000 1,600,000 D O L L A R S 1,400,000 1,200,000 1,000, , , , ,000 0 (200,000) (400,000) (600,000) FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 N e t I n v e s t m e n t E a r n i n g s, I n c l u d i n g M a r k e t W r i t e U p s ( D o w n s ) R e g u l a r E a r n i n g s / G a i n s, E x c l u d i n g M a r k e t W r i t e U p s ( D o w n s ) M a r k e t W r i t e U p ( D o w n ) o f S e c u r i t i e J u n e 3 0 o f E a c h F i s c a l Y e a r

22 City of Holland Pooled Funds Five Year Overview of Average Daily Balances and Investment Earnings 35,000,000 30,000,000 $29,404,809 $30,600,108 $29,952,997 $26,114,674 $26,323,078 25,000,000 Dollars 20,000,000 15,000,000 10,000,000 5,000,000 $193,771 $67,387 $231,416 $205, $292,042 Average Daily Balance Investment Income

23 CITY OF HOLLAND - POOLED FUNDS OVERVIEW OF INVESTMENT RETURN ON AVERAGE DAILY BALANCE Average Capital Daily Interest Gains Annualized Market Combined Annualized Fiscal Year Balance Income (Losses) Rate of Return Write Up (Down) Income (Loss) Rate of Return ,805,081 1,228, % 133,539 1,362, % ,891,269 1,276, % 143,094 1,419, % ,989, , % 62, , % ,615, , % 44, , % ,521, , % (94,082) 307, % ,114, , % (14,454) 193, % ,323, , % (70,984) 67, % ,404, , % 65, , % ,600, , % (3,596) 205, % ,952, , % 52, , %

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