ITEM NO.

7b_Supp

DATE OF
MEETING March 1, 2011

Annual Treasury And Investment

Portfolio Update for 2010
Commission Briefing
Presented by Craig Kerr
March 1, 2011

BACKGROUND
• Commission Resolution Approved Port Investment
Policy
• 2.0 Target Duration Plus Or Minus 50 Basis Points
Do Not Forecast Rates; Balance RETURN And
RISK Over Cycles
- This Strategy Outperforms The Market When Rates Are
Falling And Underperforms When Rates Are Rising

• Benchmark - Bank of America Merrill Lynch
Treasury/Agency 3 Year Index
2

PORTFOLIO COMPOSITION
12/31/2010
"HIGH GRADE"
MORTGAGE-BACKED
SECURITIES
3%

REPURCHASE
AGREEMENTS
18%

TREASURY NOTES
32%

FEDERAL AGENCIES
47%

3

INTEREST RATE TRENDS
• For 2010, Short And Medium Term Rates Stayed Within a
Narrow Trading Range And Rose At Year-end.
• The Federal Reserve Left Short Term Rates Constant
Throughout 2010 [0.25%]
• Staff Monitors Market Conditions; but, Does Not Time the
Market.
• Short and Medium Term Rates Are Expected to Rise In
The Fourth Quarter of 2011.

4

5

6

2010 YIELD COMPARISON

Q1-2010
Q2-2010
Q3-2010
Q4-2010
ANNUAL

Benchmark
1.07%
0.70%
0.48%
0.64%
0.72%

Port's Pool
2.38%
2.34%
2.39%
1.55%
2.17%

7

PORTFOLIO EARNINGS 2006- 2010

2010

2009

Year

2.17%

$19,376,723

2.76%

$21,517,877

2008

4.04%

$30,396,932

2007

2006

4.78%

3.72%

$39,142,329

$26,169,677

Interest Earnings - % Yield and $

8

YIELD HISTORY
• Year
• 2002 - 2006
• 2007
• 2008
• 2009
• 2010

Benchmark
3.13%
4.33%
2.01%
1.12%
0.72%

Port's Pool
3.69%
4.78%
4.04%
2.76%
2.17%

Nine Years

2.65%

3.58%
9

YIELD HISTORY

10

Port's Investment Portfolio Size
Fluctuates
• Port's Investment Portfolio 12/31/2010 Was
$954 Million
• Over The Past 5 Years, The Size Has
Ranged From $639 Million to $976 Million
• Size Fluctuations Are Mostly Tied To
Capital Spending:
- Capital Projects Reduce The Portfolio Size
- Bond Issues To Fund Projects Increase The
Portfolio
11

Investment Pool Participating Funds

Examples
• Minimum Operating Fund Balance: General & Airport Development = 9
months O&M expense
• Operating Funds Available for Capital: General, Airport, Tax Levy funds
programmed to be spent over the next few years.
• Bond Funds: Capital projects
• Reserves & Security: Bond reserves, customer lease security
• Special Use (primarily for capital projects): Passenger & Customer Facility
Charges, Transportation & Infrastructure