presented by indiana treasurer of state’s office
TRANSCRIPT
Presented by Indiana Treasurer of State’s
Office
Presented by :
,Indiana State Treasurer Richard Mourdock
Welcome
Investment Policies & Banking Services for Local Governments Entities
Presented by :
,Jim HoldenChief Deputy & General Counsel
Kim LoganDeputy Treasurer, Indiana Treasurer of State’s Office
Goals for Investing of Public Funds
Safety, Liquidity, & Yield
Diversification of Investments
Bank Products DDA Checking Accounts Negotiable order of withdrawal (NOW) accounts
Passbook savings accounts Certificates of Deposit (CDs) Money market accounts
Any interest-bearing account that is authorized and
offered by a financial institution in the course of its
respective business
PDIF Insured Accounts
Make sure your deposit accounts are PDIF insured Are they public funds? IC 5-13-4-20
Fees & funds in the possession of a “public officer” by
the virtue of that office Is the financial institution an approved
depository?www.in.gov/tos/files/ALLDEP.pdf
PDIF covers losses above FDIC limits
Maximizing FDIC Insurance
FDIC coverage of $250,000 per depositor (Until 12-31-13)
New program FDIC’s Transaction Account Guarantee program (TAGP)
Unlimited FDIC coverage Interest rate limited to 0.50% Your bank must be a participant in the
program Slated to expire 06-3-10
Transaction Accounts
Special Rules for Political Subdivisions Must establish transaction accounts in
depositories with branches within political boundaries
Exception for political subdivisions that cross county lines or those without a depository within its boundaries (or only one)
Doesn’t apply to county hospitals
Certificates of Deposit Required Procedures Every investing officer must obtain quotes on the specific
rate of interest for the term of the certificate of deposit
The quote may be taken by phone
The quote must be recorded in a memorandum and retained as a public record
The deposit shall be placed with the depository quoting the highest rate of interest
If two depositories offer the same quote, the investing officer has the discretion
Can invest in CDs from any depository on state’s approved
list if county commissioners of political subdivision fiscal
body passes resolution authorizing it (renewed every 2 years)
Money Market Mutual Funds Money market mutual fund requirements
Must be rated AAA, or its equivalent, by Standard & Poor’s or Aaa, or it equivalent by Moody’s
Purchases, sells, or holds direct obligations of the United States Treasury or other obligations issues by a federal agency, a federal instrumentality or a federal government
sponsored enterprise Must be purchased through an institution on the state’s approved depository list Must have a final stated maturity of one day
The mutual fund’s investments can’t exceed 50% of funds held,
except a county treasurer may exceed limit if 10 days prior to
property tax due date and property tax settlement distribution
date
Eligible Securities Securities backed by the full faith and credit of the United States Treasury or fully guaranteed by any of the following:
The United States Treasury (Notes, t-bills, and bonds)
Federal agency (Government National Mortgage Agency)
Federal Instrumentality
Federal government sponsored enterprise (Federal Home Loan Bank)
Discount notes issued by a federal agency, a federal instrumentality, or a government sponsored enterprise
Securities – Critical Criteria Use of a broker-dealer that is SEC licensed Use of a custodial bank that is on the state’s approved depository list or has combined capital and surplus of at least $10 million Securities may have a maximum maturity of 2 years Securities lending
Securities may be lent for extra income as long as its
collateralized by cash or securities issued, insured, or
guaranteed by the federal government or a federal
agency
Repurchase Agreements
An agreement involving the purchase and guaranteed resale of securities Can be a one time commitment or an ongoing commitment Must have a final stated maturity of one day (overnight) Must be fully collateralized Must be made through a depository on the state’s approved depository list
Local Boards of Finance Members
County – Board of Commissioners & County Treasurer
Marion County – County Treasurer, County Auditor, County Assessor, City Controller, Mayor, President of the School Board City – Executive and fiscal body
Town – Fiscal Body
Other – Fiscal body of each political subdivision
* Note: cities, towns, and county hospitals exempt (IC 5-13-4-19)
* School Corporations may determine if a Board of Finance meeting is need on an annual basis (IC 5-13-7-5)
Local Boards of Finance Responsibilities
Each local board of finance SHALL meet annually after the first Monday and on or before the last day of January and do the following:
From the board’s membership elect a president &
secretary Receive and review the report required by IC 5-13-7-7 Review the overall investment policy The report must contain a summary of all investments
made during the previous calendar yearConsult your county attorney or counsel regarding this
requirement
Banking Services
Check costs, check processing, deposit processing, Automated Clearing House (ACH), and wire transfers
Are usually not customized for all customers, majority
of financial institutions offer them. This allows room to
negotiate costs with your financial institution, not
always but sometimes.
Banking Services
Lockbox is the collecting, processing, and reporting of payments provided by a financial institution to a client.
Some custom reports available Not a of lot margin for negotiating costs if
customizations are done Direct Deposit is an electronic payment
system to a payee’s bank account (Great for payroll.)
Banking Services Remote Capture/Image Transmission is the process of scanning and transmitting electronic images of paper checks to financial institutions
A report is created by batch with amounts, payee names, serial numbers, and etc. exhibited Paper checks can be retained and then destroyed after 15 days
Funds are directly deposited to your operating account Daily deposit deadline extended Quicker access to funds for investment purposes Earlier notification of returned items Online access to check images and deposits
Banking Services
Online Banking allows you instant access to your account
To do wire transfers and moving of funds Can assist with setting a daily cash position for investing purposes Can assist with reducing paper checks if funds are
moved on line
Banking Services
Positive Pay allows a customer to provide copies of outstanding checks to a financial institution, which then compares payee names, amounts, endorsers, and check numbers to paper checks presented for payment. If a discrepancy is found between the information provided to the bank and the paper checks being cashed, the customer can deny the payment of the check
Reduces fraud Financial institutions can stop the images of
questionable checks so no check needs to be returned, which reduces costs
Banking Services
Imaging Services is offered by most financial institutions or they have a relationship with a vendor that will allow a customer to view items on line or by CD
Reduces storage, paper usage, research time, and cuts
overall costs Recommended for documents of all kinds
Banking Services
Sweep Account allows excess funds in a checking account to be placed in an overnight repurchase agreement or a NOW account, which earns a rate of of interest on the funds.
Financial institutions do automatically overnight and return funds back to your checking account the next day.
Banking Services
Charge Card Payments can be accepted by county organizations, schools, or town by joining the State of Indiana’s charge card contract with Metevante, Inc.
Contact: Lottie Hooyer Contract Manager Indiana Department of Administration Indiana Government Center South 402 W. Washington St., RM W468 Phone Number 317.234.0067 [email protected]
Banking Services
E-Check is another electronic payment process that can be done through a web application or the sliding of a debit card at the time of purchase by a customer.
Additional ways to cut costs
Courier Fees incurred for the deliver or pick-up of paper checks or financial reports handled by your financial institution or third party can be negotiated. Also, look at consolidating pick-up/drop-off points as a way to reduce costs
Multiple elected officials working together to leverage costs associated with using the same financial institutions or vendors (Example County Treasurer & County Auditor)
Kim Logan Deputy Treasurer
Indiana Treasurer of State’s Office
302 W. Washington St., IGC-S E016
Indianapolis, IN 46204317-233-0921
[email protected]/tos/
Questions /Comments
Jim Holden Chief Deputy Treasurer
& General Counsel Indiana Treasurer of State’s
Office200 W. Washington St., 242
Indianapolis, IN 46204317-232-6388
[email protected]/tos/
Presented by :
,Dan HugeExecutive Director, Indiana Bond Bank
Indiana Bond Bank Option for Local Governments
The primary mission of the Indiana Bond Bank is to
assist local government or qualified entities with the
process of issuing debt.
Our Mission
Indiana State Treasurer Richard MourdockChairman
Indiana Bond BankBoard of Directors
Dan HugeExecutive Director
Ron MangusProgram
Operations Director
Cindy Burres Office
Manager/Leasing
Coordinator
Organizational Structure
Created by the Indiana General Assembly in 1984
Self-supporting quasi-governmental entity
A seven member board governs the Bond Bank
The State Treasurer statutorily serves as Chairman of the Board
The director of the Indiana Finance Authority statutorily serves as a board member
The Governor appoints five board members
Structure
Hoosier Equipment Lease Purchase Program (HELP)
Advance Funding Program
Pool Program
New Programs
Programs
Indiana Bond Bank has issued $18.2 billion in bonds/notes since its inception
$2.57 billion outstanding Financing Conduit The Bond Bank purchases bonds and notes from communities and in turn sells its own obligations
to the open market The pooling process allows communities to realize savings that are achieved by sharing of fixed
costs and economies of scale
Debt Issuance
Fiscal Year # of Issues Amount
2003 17 $2,045,252,073
2004 18 $2,928,333,298
2005 10 $1,151,790,000
2006 13 $822,565,000
2007 4 $785,945,000
2008 7 $1,378,970,000
2009 13 $1,696,373,000
Activity
Lease essential equipment Competitive interest rates
Fixed to treasury yields Contact the Bond Bank for interest rates
Repayment flexibility Annually Semi-annually Quarterly Monthly
Option to escrow
HELP Program
Since 1991
Assisted over 200 communities
Over $180 million in equipment
Four program underwriters
Title to asset passes to entity upon completion of lease
term
Overview
Fire Trucks Police Cars Ambulances Tandem Trucks Computers Phone Systems Safety/Security Equipment 911 Emergency Equipment/Systems
Garbage Trucks Snow Plows Sewer Vacs Radio Equipment Voting Machines Buses Portable Classrooms Book Mobiles And much more…
Equipment Leased
Fiscal Year Amount closed
2003 $ 31,592,073
2004 $ 13,188,599
2005 $ 14,781,235
2006 $ 10,369,221
2007 $ 9,064,113
2008 $ 6,429,905
2009 $ 4,755,968
Fiscal Year = July 1–June 30
Fiscal Year Analysis
1.79% one-year interest rate was among the lowest
published in Indiana
Highest Standard & Poor’s short-term credit ratings
Program size and participants increased
Flexible draw and pre-payment options
Provide $357 million to over 122 governmental
entities throughout Indiana
‘09 Advanced Funding Program
1.25% interest rate
79 participants
$161 million notes
Closed on June 25, 2009
’09 Midyear Program
Series
2004
Series
2005
Series
2006
Series
2007
Series
2008
Series
2009
Program Size in Millions
$843 $537 $296 $460 $522 $357
# of Participants
173 126 110 114 119 122
Entity RateAll Inclusive
1.29%
2.52%
3.44%
3.68%
2.39%
1.79%
Historic Pricing Trends (1 year Maturities) Advanced Funding Program
Applications:
Cash Flow Statements:
Participant Resolution/ Ordinance Adopted:
Interim Funds Distributed:
Closing/Funds Distributed:
Midyear Program
Due Date
10/09/2009
10/30/2009
11/23 – 12/4/2009
1/05/2010
1/28/2010
June 2010
‘10 Advanced Funding Participant Deadlines
Long Term Debt Program
Typical Uses
Construction of Essential Use Facilities
Acquisition/Improvement/Expansion:
Utility systems
Building projects
Assisted over 200 communities
Issued pooled debt of over $440 million
Pool Program Overview
Revenue Bonds
Debt Service Coverage of at least 125%
General Obligation Debt
Property Taxes used for repayment
Building Corporations – Lease revenues
Types of Long-term Debt Financing
Indiana Bond Bank Rating “AA”
Utilize Bond Bank experience in issuing debt
Reduced cost of issuance
Flexible Terms: 7 to 30 years
Projects over $150,000
Pool Program Advantages
Year AA BBB Difference
2010 0.42 2.16 (1.74)
2014 2.01 3.79 (1.78)
2019 3.14 4.92 (1.78)
2024 3.56 5.19 (1.63)
2029 3.86 5.34 (1.48)
2034 4.13 5.44 (1.31)
2039 4.20 5.49 (1.29)
Municipal Market Data GO Yields as of 10-14-09
Qualified Entities (QE) gain access to capital markets
Economic savings by issuing bonds using IBB’s higher credit rating
Estimated annual savings for each QE range from $5,000 -
$10,000 on million dollar bond issues
Savings based upon QE underlying credit rating and other factors
Economic Benefits for Using the Pool Program
Use as a budgeting tool to guard against rising fuel prices
Allows smaller entities to pool their fuel budgets to create an effective hedge size (42,000 gallons)
Share program costs for cost efficiency
Experience of IBB Staff/Professionals from 2009 Fuel Hedge Program
2009 – Participants were 2nd class cities
2010 – Expanded to Schools and County Government
Fuel Hedge Program
Common School Fund
Qualified School Construction Bonds (QSCB’s)
Economic Recovery Zone Bonds
Other Programs
Dan Huge Executive DirectorIndiana Bond Bank
10 W Market St., Ste 2980Indianapolis, IN 46204
[email protected] www.in.gov/tos/bond/
Questions /Comments
TrustINdiana - Alternative Investment Option for Local Government
Presented by :
,Kelly MitchellDirector , TrustINdiana
Authorized by the Indiana General Assembly’s passage of Indiana Code § 5-13-9-11 during its 2007 session. TrustINdiana allows local units as well as the State of Indiana to invest in a common pool of assets that preserves the principal, remains highly liquid, and maximizes the return on the investment. Key characteristics
Investing in Indiana, Indiana Banks High quality investments, e.g. treasuries, agencies,
CP Professional money management-MBIA Municipal Investors Services Corp. 1.00 NAV
General Information
Pool features protect the safety of your funds
Public sector funds invested only in securities allowed by Indiana law
Assets held in a third-party custody account solely for
TrustINdiana funds
Fund management by professionals with over 20 years of public sector expertise
Audited annually by an independent auditing firm
At least 50% of funds held in A1/P1 Indiana Banks
Safety
Funds are available when needed
Put dollars in today, get them out tomorrow with interest
100% liquidity
Daily access to funds with no withdrawal penalties
Maximum Weighted Average Maturity (WAM) of 60 days or less
Active portfolio management ensures that cash is readily available
Liquidity
TrustINdiana is designed with convenience in mind
Access: Any business day
Transactions executed by toll-free phone, fax, or secure internet access
Client Connection: Feature offers on-line access to transactions, rates, account statements, and reports
Ability to set up pending transactions
Read-only access available
Funds can be transferred via wire or ACH
Convenience
TrustINdiana is actively managed and seeks to achieve
the highest yield available
Greater investment options and diversification than
available to local units
Active fund management by professionals with
extensive public sector expertise
Returns calculated and paid daily
Competitive Yield
Features
No minimum balance
No limits on number of transactions
No limits on transaction size
No hidden fees or charges
No withdrawal penalties
Transactions
Account Information
Detailed monthly statements
Unlimited number of sub-accounts to track funds by purpose (Operating Funds, Bond Proceeds, Reserve Funds, etc.)
Simple structure for annual audit process
Daily rate notifications
Participant Account
64%
23%
8%6% Bank Deposits
Money Market Funds
A1-P1 Com-mercial Paper
Federal Agencies
Portfolio Composition
38%
32%
1%
8%
14%
7%
Municipalities
Schools
State
Libraries
Counties
Other
Participant Breakdown
99%
1%
A1+/P1
A1/P1
Quality of Investment
Kelly M. Mitchell, DirectorTrustINdiana
Office of the Treasurer of Indiana242 State House, 200 W Washington St.
Indianapolis, IN 46204888-860-6242
Questions /Comments
Indiana Board for Depositories Keeping Local Funds Safe
Presented by :
,Pat Hastings Executive Director, Indiana Board for Depositories
Indiana Board for Depositories
What is the Indiana Board for Depositories? What is the Public Deposit Insurance Fund (PDIF)? What are considered “public funds”? What institutions are eligible to become a state depository? What happens if a bank fails? Have any depositories closed recently?
What is the BFD?
Quasi-governmental Agency Created in 1937 by IC 5-13-12 in response to bank failures during the Great Depression Keeps a list of approved depositories Manages the operation of the PDIF The Treasurer is the Secretary/Investment Managers Governor, or his designee, is the Chairman
Insurance fund Covers the full amount of public funds over and above
the amount covered by the FDIC Deposit accounts Approved depositories According to IC 5-13
Unique to Indiana and a benefit to public entities
0.2% - 0.4% higher interest rate on public deposits $300 million in assets Funded by fees on banks holding public funds
What is the PDIF?
Definition from IC 5-13-4-20:IC 5-13-4-20"Public funds“Sec. 20. "Public funds" means all fees and funds of whatever kind or character coming into the possession of any public officer by virtue of that office. The term does not include:
support payments made to the clerk of a circuit court
under IC 31-16-9 (or IC 31-1-11.5-13 before its repeal);
or proceeds of bonds payable exclusively by private
entity.
What are “public funds”?
What is a “public officer”?
Public Officer defined by IC 5-13-4-21
IC 5-13-4-21
"Public officer“
Sec. 21. "Public officer" means any person elected or appointed to any office of the state or any political subdivision. "Public officer" includes an officer of all boards, commissions, departments, institutions, and other bodies established by law to function as a part of the government of the state or political subdivision that are supported wholly or partly by appropriations of money made from the treasury of the state or political subdivision or that are supported wholly or partly by taxes or fees. "Public officer" does not include an officer of an independent body politic and corporate set up as an instrumentality of the state but not constituting a political subdivision.
What is a “public officer”? Any person elected or appointed to any political subdivision An officer of all:
Boards Commissions Departments Institutions Other bodies that function as a part of a political subdivision
Supported wholly or partly by: Appropriations from the treasury of the
political subdivision Taxes and fees
A bank headquarter in Indiana or a national bank with a branch in Indiana A federal charted savings association with a headquarter in Indiana or a branch in Indiana A federal charted savings bank with a headquarter in Indiana or a branch in Indiana
A state charted credit union in Indiana that has assets of $3 million dollars or more with a headquarter in Indiana or a branch in Indiana
Who can become an approved depository?
Who can become an approved depository?
199 depositories www.in.gov/tos/files/ALLDEP.pdf
There are $11.5 billion in public funds in Indiana’s public depositories
Recovery process for public funds in a closed depository
Department of
Financial Institutions
Attorney General
Auditor of State
Department of
Financial Institutions
Public Officer
Newspaper
Public Officer
Judge
Board for Depositorie
s
Public Officer
Recovery process for public funds in a closed depository
Department of
Financial Institutions
Attorney General
Auditor of State
Department of
Financial Institutions
Public Officer
Newspaper
Public Officer
Judge
Board for Depositorie
s
Public Officer
Indiana Department of Financial Institutions (DFI) will determine the amount of public funds on deposit at the closed depository and certifies that information to Indiana Attorney General’s Office, (AGO) the Indiana Auditor of State’s Office, (ASO) and the public entity, public officer, that has the funds in the depository
Recovery process for public funds in a closed depository
Department of
Financial Institutions
Attorney General
Auditor of State
Department of
Financial Institutions
Public Officer
Newspaper
Public Officer
Judge
Board for Depositorie
s
Public Officer
Within 10 days after receiving certification, the public officer shall furnish to the AGO and the ASO the following:
Verified statements on the amount of their funds in closed depository
Certified copies of the resolutions under which the deposits were made
Additional information that might be requested by the AGO and ASO
Recovery process for public funds in a closed depository
Department of
Financial Institutions
Attorney General
Auditor of State
Department of
Financial Institutions
Public Officer
Newspaper
Public Officer
Judge
Board for Depositorie
s
Public Officer
The Attorney General and Auditor of State will determine the amount covered by the PDIF, and provide their decision to the public officers, the DFI and the BFD.
Recovery process for public funds in a closed depository
Department of
Financial Institutions
Attorney General
Auditor of State
Department of
Financial Institutions
Public Officer
Newspaper
Public Officer
Court
Board for Depositorie
s
Public Officer
The DFI Publishes the decision of the AGO and ASO
After the publication, the Public Officer has 10 days to appeal to a court.
After the 10 days has expired, or a court rules for or against the AGO and ASO decision.
Recovery process for public funds in a closed depository
Department of
Financial Institutions
Attorney General
Auditor of State
Department of
Financial Institutions
Public Officer
Newspaper
Public Officer
Judge
Board for Depositorie
s
Public Officer
20 Days 10 Days 50 Days 10 Days
While we will attempt to provide the funds as quickly as possible, it could take up to 90 days after a depository is closed to receive funds. It could be longer if the decision is challenged in court.
Recently Closed Indiana Depositories
Irwin Union State Bank & Peoples Community Bank ALL deposits of both banks were assumed by
the First Financial Bank in Hamilton, OH. Therefore, there
was NO loss to the public entities or the PDIF
Pat Hastings, Executive DirectorIndiana Board for Depositories
One North Capitol Ave., Suite 444Indianapolis, Indiana 46204
www.in.gov/tos/deposit/index.htm
Questions /Comments