Agenda Packets - 2012/05/29 - Laserfiche WebLink

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Investments & Economy: The City has and will continue to experience lower investment earnings as a result of lower rates in 2012 and 2013. Investment income for 2012 is $117,175 compared with $139,757 for the same period in 2011. Our portfolio for March 31, 2012 was 28,134,194 compared with $27,999,675 for 2011. I have attached the March 31st summary investment statements for your review. The Federal Open Market Committee (FOMC) continues to maintain the discount rate at 0% - .25%, which is the same level as in 2011, 2010, and 2009. The Federal Reserve cannot affect interest rates by lowering the discount rate so they had been purchasing treasury securities, which has artificially lowered rates on those securities. This program known as quantitative easing II ended in June 2011 and there has been speculation if QEIII may be instituted. Treasury bills are presently providing the following rates-of-return: 2 year – .29% vs. .75% in 2011; 5 year – .74% vs. 2.25% in 2011; and 10 year – 1.73% vs. 3.625% in 2011. The Jumbo CD market is presently providing returns for 1 year CD’s of .72% vs. .97% in 2011 and 2 year CD’s of .87% vs. 1.25% in 2011. Unemployment continues to remain at an elevated level with the number of Americans employed (labor participation rate) at the lowest level in 30 years. There are many headwinds and economic improvement will be at a very slow rate and could be impacted by European debt and recession issues and a Chinese slowdown, growth will be weak in 2012 and 2013. Inflation continues to lurk as an issue that we face in the coming years and a lot of things have to go right for that not to happen. State unemployment for March was 5.8% which compares favorably to national unemployment of 8.2% for March. At the state level, the legislature has adjourned with the passage of a stadium bill and a bonding bill. The legislature passed and the governor signed a small tax bill that would limit LGA to Cities at the lesser of the 2012 amount or the formula amount. The silver lining is that the City is projected to receive $232,078 in 2013 the same as we did in 2012 and 2011. The bad news is that the formula would have provided $642,802. The state is projecting a 1 billion deficit for the next biennium. (July 1, 2013 thru June 30, 2015) We will not know the impact of this deficit until the February 2013 revenue forecast which could improve or reduce that amount. The housing market appears to be forming a bottom as the foreclosure rate is declining and available inventory has declined from 45,000 units to a more normal 17,000 units. Housing values have started to increase. Finance Department Operations: The audit fieldwork is complete for the 2011 audit and MMKR presented their management report at the May 14, 2012 Council meeting. Staff completed work on the five year financial plan and has begun work on the 2013 City budget. Respectfully Submitted, Mark Beer, Finance Director