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TRANSCRIPT
Investment Portfolio
Overview
April 4, 2017
Date of Meeting: 04/04/17Item No.: 5B
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• Background
• Investment Guidelines
• Performance Targets
• Portfolio Composition
Investment Portfolio Overview
Background• Per the Charter, each Port initially contributed $25.5 million
working capital funds to the NWSA:
• Working capital liquidity = $3.6 million per Port
• Working capital reserve = $21.9 million per Port
• Per the Charter, each Port initially contributed capital
construction funds to the NWSA:
• Capital construction = $13.5 million per Port (2016 amount)
• 2016 funds fully spent
• Starting 2017, implemented monthly pay-as-you-go funding
by Homeports
• Easier tracking of bond proceeds use for IRS reporting
• Allows each homeport to manage its own investments
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Background
• NWSA manages North Harbor Lease Security fund
• Equivalent to 1-year cash rent at T18
• Approximately $12.4 million
• Interest earned credited back to customer
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Investment Guidelines
• Purpose:
• Manage investments in a manner which preserves
principle while providing highest possible return
• Meet daily cash flow demands of the NWSA
• Conform to all state statutes governing the
investment of public funds
• Objective:
• Safety – Preservation of capital
• Liquidity – Ability to meet all cash flow requirements
• Return on Investment – Achieve market rate of
return within confines of risk and cash flow
constraints
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Investment Guidelines
• Delegation of Authority:
• Authority to manage investment portfolio derived from
RCW 53.36.010, regarding Port District Treasurer,
and by
• NWSA Resolution No. 2015-01 and 2015-03,
delegating authority to Treasurer and Deputy
Treasurers
• Authorized and Suitable Investments:
• All investments authorized by RCW 39.59 (Public
Funds – Authorized Investments), RCW 43.84.080
(Investment of Current State Funds), and all
referenced RCW’s within
• All rated “A3 or A-” or better
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Some Authorized Investment Examples
• US Agencies: (implicit/explicit US Government guarantee)
• Federal National Mortgage Association (FNMA)
• Federal Home Loan Mortgage Corporation (FHMC)
• Federal Agricultural Mortgage Corporation (FAMCA)
• Municipalities – Guaranteed by tax levies (any US issuer)
• State, City, County, School districts, Water districts
• Municipalities – Revenue (WA state issuer only)
• Energy Northwest, Washington State University
• Supra-Nationals (US Government largest participant)
• World Bank, Asian Development Bank
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Some Authorized Investment Examples
• Washington State Local Government
Investment Pool (LGIP)
• Liquid pool managed by WA State Treasurer
• Similar to a Money Market fund
• Corporate Debt
• Bonds and Commercial Paper of major corporations
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Investment Guidelines
• Diversification:
• Diversified by security type and maturity
• Limits based on issuer type, issuer, and specific issue
• Ex: 60% U.S. Agency Bonds, 20% FNMA
• Ex: 40% Municipal Bonds, 5% WA State
• Performance Standards
• Working capital liquidity and reserve fund
• Performance goal is 1-year US Treasury Bill Index
• Lease security fund
• Performance goal is the safe preservation of
principle
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Working Capital Reserve
• Working Capital reserve is approximately $43.8 M
• Approximately 6 months operating funds
• Funds to be used to pay expenses in case of reduced
revenue
• Funds can be invested to maximize return or
maximize liquidity
• Maximizing return carries risk of loss if bonds have to be
sold before maturity to generate cash
• Maximizing liquidity may result in lower earnings
• Staff currently managing to a 1-year “duration” target
• Provides flexibility to invest some funds longer for yield,
balanced by shorter-term investments for liquidity
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Lease Security Fund
• Lease Security fund is approximately $12.4 M
• Funds to be used to replace lost rent in event of
customer default
• Interest earned credited back to customer
• Performance goal is the safe preservation of principle
• Staff currently investing fund in Washington
State Local Government Investment Pool for
liquidity
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Portfolio Composition as of 2/28/2017
• Working Capital Liquidity Composition
• Held in bank accounts at both homeports
• Working Capital Reserve Composition (par value)
• Treasury/ Agencies - $19 million
• Munis - $7.5 million
• LGIP - $17.3 million
• Capital Construction Composition
• No funds; Pay-as-you-go
• Lease Security Composition
• Invested in LGIP for liquidity
• Based on cash earned through February YTD, the estimated
annual return for the Working Capital Reserve is 1.25-1.5%.
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Conclusion
• Staff will invest Alliance funds in accordance with
the Guidelines and RCW’s
• Investment Guidelines will be reviewed annually,
and managing members updated if there are
significant changes
• Staff will report annual investment performance
to the managing members
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