cover
TO: Mayor Thomas J. Weisner
FROM: Brian W. Caputo, Chief Financial Officer/City Treasurer
DATE: September 23, 2016
SUBJECT:
A Resolution Designating the Invesco Premier Tax-Exempt Portfolio as an Authorized Depository of the City.
PURPOSE:
To obtain the approval of the City Council of the attached, proposed resolution that would designate the Invesco Premier Tax-Exempt Portfolio as an authorized depository of the city.
BACKGROUND:
From time to time, the city has money on hand that is not immediately needed to satisfy financial obligations. In some instances, such resources may be invested for a long period of time. In other instances, resources are awaiting investment or must remain liquid to satisfy operational needs. When resources are awaiting investment or must remain liquid to satisfy operational needs, the city typically places the resources in a money market fund. The placement of resources in a money market fund ensures that those resources do not remain idle from an interest earning standpoint.
DISCUSSION:
Under federal tax law, when a state or local government holds bond proceeds for more than three years, the government must act to restrict the investment yield on those bond proceeds. If a state or local government does not act to restrict the yield, the government may be required to remit (rebate) certain excess interest earnings (arbitrage) to the federal government. To avoid the need to rebate arbitrage to the federal government, the state or local government may restrict the yield on the bond proceeds concerned by investing in certain allowable instruments. These investment instruments include tax-exempt municipal bonds and money market funds investing in tax-exempt securities.
The city has been holding some proceeds of the Series 2008B Tax Increment Revenue (TIF #3) Bonds for more than three years. The city has been restricting the yield on the bond proceeds by investing the proceeds in tax-exempt municipal bonds and in the ...
Click here for full text