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Investments: <br />The City has seen interest rates continue to trend lower as higher yielding agency bonds are called <br />by their issuers. Investment income for 2012 is $151,827 compared with $232,784 for the same <br />period in 2012. Our portfolio for June 30, 2012 was 27,592,004 compared with $29,384,194 for <br />2012. I have attached the June 30th cash balance and investment statements for your review. <br /> <br />The Federal Open Market Committee (FOMC) has maintained the current discount rate at 0% - <br />.25%. The FOMC has guided that they will keep rates low into 2015. The Federal Reserve cannot <br />affect interest rates by lowering the discount rate so they have used various bond buying programs <br />(QE1, QE2, and QE3), which has artificially lowered rates on those securities. There is some <br />speculation that the Fed will start to taper QE3 in the near future thus pushing rates up in the last <br />month by 100 basis points. The state of the bond market would indicate that more normal market <br />driven rates may be around the corner. Treasury bills are presently providing the following rates- <br />of-return: <br /> <br />Treasury Securities 2013 2012 <br /> 2 year .300 .220 <br /> 5 year 1.380 .580 <br />10 year 2.620 1.440 <br />30 year 3.72 3.200 <br />Cert. of Deposit <br /> 1 year .350 .250 <br /> <br />Inflation in the next 12 to 18 months does not seem to be a concern for the FOMC. GDP for the <br />second quarter was at 1.7%. State unemployment for June was 5.2% compared to national <br />unemployment of 7.6%. The job market continues to be slow to recover and housing appears to <br />be in the early stages of recovery. <br /> <br />FINANCE DEPARTMENT OPERATIONS: <br /> <br />Second quarter: <br />The annual financial audit and preparation of the 2012 comprehensive annual financial report <br />consumes a lot of staff time during the second quarter. Staff also began and completed work on <br />the five year financial plan and began work on the 2014 budget. <br /> <br />Third and fourth quarters: <br />The third and fourth quarters will be dominated with budget related work which will culminate with a <br />truth-in-taxation hearing and adoption of the 2014 budget and tax levy in December. The third <br />quarter will also include certifying assessments for delinquent utilities, diseased trees, abatements <br />and other charges due to the City. Work on insurance policy renewal occurs in the fourth quarter. <br /> <br />Respectfully Submitted, <br /> <br /> <br /> <br /> <br />Mark Beer