City of Arvada Mid-Year 2018 Financial Report

Financial report MID-YEAR 2018

2018

Finance Department • 8101 Ralston Road • Arvada, Colorado 80002 720-898-7120 • www.arvada.org

Contributors: Bryan Archer, Director of Finance Lisa Yagi, Assistant Director of Finance Ryan Adler, Budget Analyst Debra Nielson, Controller Vesta Weinhauer, Accounting Supervisor Arlene Martinez, Executive Assistant

Table of Contents

Table of Contents Overview............................................................................................................................... 2-3 General Fund........................................................................................................................ 4-7 Street Maintenance Fund...................................................................................................... 8-9 Parks Fund....................................................................................................................... 10-11 Special Revenue Funds Tax Increment Funds..................................................................................................... 12-13 Community Development................................................................................................... 14 Arvada Housing Authority................................................................................................... 15 Capital Improvements Projects Fund................................................................................. 16-17 Enterprise Funds Water Fund........................................................................................................................ 18 Wastewater Fund............................................................................................................... 19 Stormwater Fund............................................................................................................... 20 Golf Fund........................................................................................................................... 21 Food Service Fund (Arvada Events)................................................................................ 22-23 Internal Service Funds Insurance Fund.................................................................................................................. 24 Computer Fund.................................................................................................................. 25 Vehicle Fund...................................................................................................................... 26 Print Services Fund............................................................................................................ 27 Buildings Fund................................................................................................................... 27 Arvada Economic Development Association (AEDA)...........................................................28-29 City of Arvada Investment Report...................................................................................... 30-31

1

OVERVIEW

2018 Mid-Year Financial Report The Financial Report for the City of Arvada provides an unaudited overview of the major funds and how their revenues and expenditures performed in comparison to budget. This is not meant to be a complete accounting, but rather a quick look at the highlights.

The U.S. economy continues to charge ahead even though warning signs are starting to flash. Job growth is strong, with the unemployment rate at an 18-year low of 3.8%; however, wage growth is slow, averaging 2.7% year over year, which is basically the same rate as inflation. The stock markets continue to hover around record highs, driven by tax cuts and low interest rates, but the fear of trade wars have added to the instability. The bond market is fearful of the flattening yield curve with short-term and long-term bond yields perilously close. When short-term bond yields exceed long-term bond yields, it very often signals a recession. For context, the last time the U.S. yield curve inverted was in 2007, right before the Great Recession. It should be noted that the global yield curve has already inverted – also the first time since 2007.

Unemployment Rates 2016-2018 5.5 5.0 4.5 4.0 3.5 US

3.0

Colorado

2.5

Arvada

2.0

2016

May

April

March

February

January

December

October

November

September

July

2017

August

June

May

April

March

February

January

December

November

October

August

September

July

May

June

April

March

January

February

1.5

2018

The Federal Open Market Committee (FOMC) raised interest rates by .25% at their June meeting. This was the second time in 2018 that short-term rates were raised, bringing the target to 1.75 to 2.00%. At least one more increase has been predicted for 2018.

Colorado continues to be ranked the top economy in the nation with both population and job growth outpacing the national average. Median income is 14% higher than the national average and the environment is very supportive of new businesses. Millennials are choosing to move to the state in droves, driving up the demand on the housing market and the industries that support it.

The local economy has maintained the trend of slow-but-steady growth that was set in the first quarter of 2018. Sales tax is up 5.3%, led again by fast-casual restaurants, clothing stores and liquor stores. Sales tax is the largest revenue category, accounting for over 55.7% of the total revenues for the General Fund.

While other revenue categories have maintained their growth patterns, Auto Use and Building Use showed signs of slowing in the second quarter. Auto Use was down 1.6% through the second quarter of 2018 as compared to 2017. This was the first quarterly decrease since 2010 and is reflective of what is happening at the national level. The 2018 budget does reflect a reduction in Auto Use tax.

Building Use tax has also decreased dramatically, down 31.4% as compared to 2017. Single-family detached home permits came in at 250 through June compared to 323 for the same time period in 2017. This represents the second year in a row of reduced permits, but the first year of lower corresponding revenues. In 2017, the reduction in building permit fee revenue was offset by increased roofing permit fee revenue. This isn’t yet cause for alarm! To put this in context, during the great recession, the City averaged less than 100 single-family detached home permits per year.

2

OVERVIEW

The Street Maintenance fund is deep into their work plan for 2018. The milling and overlay contract has been extended through November to try and take advantage of the good conditions. Almost $6 million has been spent through July on the combination of Concrete Replacement, Crack Seal and Milling and Overlay.

An update to the Pavement Condition Index (PCI) will be completed later this year to quantify the changes made to the rating with the additional funding.

The groundbreaking for the new police station located in Whisper Creek, called the Delta Station, was on June 25th. Construction is expected to take 18 months to complete, with a move-in date of January 2020. The station will be cash-financed and will complete the plan to have a station in each of the four police sectors.

Delta Station Groundbreaking June 25, 2018 In the Capital Improvement Projects fund, three projects are highlighted for this quarter. These include the Fiber Conduit Boring, Leyden Road Street Improvements and two parks that will undergo major renovations as part of the “Taking Lasting Care” initiative.

The City operates five enterprise funds, Water, Wastewater, Stormwater, Golf and Arvada Events. Each of these funds generates the majority of their revenue through user fees. The Water, Wastewater and Stormwater Funds also collect tap fees from new residents that join the system. These fees are used for major capital maintenance and replacement on the various systems. User fees for three utility enterprise funds are used to offset the cost of operating the system. The Golf enterprise just completed a major renovation of the West Woods Golf Club, including a new clubhouse, new irrigation system and a new restaurant. The fund is now renovating the Lake Arbor Golf Club with a new pro shop, new bathrooms and an updated restaurant and bar area. Finally, Arvada Events is working handin-hand with the Arvada Center nonprofit to try and maximize usage of the space at the Arvada Center. Arvada Events is also updating a market study completed two years ago to include the financial feasibility of relocating to another location inside the City. This work should be completed later this year or early next year.

Staff has presented City Council with many different options for the approximately $4.5 million of capital money that will be available starting in 2019. These dollars are currently being used for the sales and use tax bond that was issued in 1998. City Council has narrowed the projects list down to two projects — Ralston Road improvements and 72nd Avenue widening and underpass between Kipling Street and Oak Street. These projects carry a combined price tag of just under $80 million. A successful vote of the citizens is required for the bonds to be issued. Council will consider putting this item on the November ballot later in August.

R. Assmus

3

GENERAL FUND

General Fund Overview The General Fund pays for the City’s basic services. This includes police, planning, transportation planning, street light maintenance and costs, building activity and general administration. In addition, the General Fund also provides for the following: • Operational support to the Parks Fund and Arvada Economic Development Association • General Debt Service payments • Transfer to the Capital Improvements Fund for new parks, transportation and other infrastructure projects • Grant support to the Arvada Center The following table provides a comparison of budgeted cash balances, revenues and expenditures to budget, including prior year amounts in the same areas.

General Fund Beginning Fund Balance

2018 Budget

As of 06/30/18

As of 06/30/17

$44,405,000

$44,405,000

$88,541,067

$43,459,809

$44,759,843

$85,294,069

$37,417,274

$37,469,970

9,323,734

4,321,125

5,337,000

400,000

400,000

400,000

$95,017,803

$42,138,399

$43,206,970

1,321,410

1,552,873

REVENUES Total Revenues EXPENDITURES Ongoing Capital JPPHA (Jefferson Parkway Public Highway Authority) Total Expenditures Income/(Loss)

(6,476,736)

Ending Fund Balance

$37,928,264

• The

2018 beginning fund balance was $44,405,000.

• $8,694,692 of the expenditures is dedicated to projects not completed in 2017 and one-time items.

• The 2018-2028 10-year financial plan requires the use of $10,982,503 of the fund balance.

$45,726,410

General Fund Ending Fund Balance by Quarter Compared to Fund Balance Goal of 17% of Budgeted Expenditures 60% 50% 40% 30% 20% 10% 0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018

4

GENERAL FUND Sales Tax 55.7%

Revenue Highlights

• Overall revenues for the first six months saw a decrease of $1,301,034 or 2.9% from the same period in 2017.

• Building use tax and building permit revenues decreased $2,059,308 or 31.3% from 2017; however, this revenue category is at 96.7% of budget for 2018.

• Court fines and fees decreased $190,532 or 20.6% from 2017.

• Major revenue categories of sales tax, use tax, property tax, building and intergovernmental revenues are discussed in more detail in the “Revenue Highlights” section.

2018 BUDGETED GENERAL FUND REVENUES

Property Tax 6.4%

Use Tax 1.8% Other 16.1% Interest .8%

Auto Use Tax 7.5% Building Use Tax & Court Fines & Fees Permits 2.1% 5.0%

Franchise Fees 4.6%

Sales Tax

Sales Tax Collections

• Sales tax is up 6.8% for the second quarter; however, there was a large retailer that submits 13 sales tax returns in a year and the second quarter represents four sales tax returns instead of three.

Without the extra return, the sales tax increase is 5.3%.

• Most sales tax categories increased in the second quarter, with the largest categories being fast-casual restaurants, clothing stores and liquor stores.

• Telephone equipment and office supplies/equipment categories are both down in the second quarter.

• Public utilities, a large category of sales tax, was down in the first quarter, but rebounded due to the warm weather and is now showing a 1.1% increase.

$60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0

06/30/2014 06/30/2015 06/30/2016 06/30/2017 06/30/2018 2018 Budget Sales Tax $16,788,754 $17,844,565 $18,514,615 $19,466,917 $20,793,558 $51,532,219

Use Tax Building Use Tax • Building use tax decreased 31.4% through the second quarter, reflecting the general slowing of building permits.

• Actual receipts have already exceeded budget even though growth is slowing.

• Excess use tax will be used to fund one-time expenditures or it will be added to the fund balance Auto Use Tax • Auto use tax decreased 1.6% in the second quarter.

• Nationally auto sales are slowing and this is the first sign of that trend for the City - the first quarterly decrease since 2010.

General Use Tax • General use tax is up 53.0% for the second quarter.

• The increase in use tax is due to two large companies.

• General use tax can fluctuate; therefore, it is unlikely that this increase will continue for the rest of the year.

Use Tax Collections $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 General

06/30/2014 $458,523

06/30/2015 $563,868

06/30/2016 $459,691

06/30/2017 $437,439

06/30/2018 $669,368

2018 Budget $1,665,646

Auto

$2,295,021

$2,633,021

$2,685,107

$3,229,962

$3,179,145

$6,982,500

Building

$2,209,249

$2,781,085

$3,332,240

$4,004,981

$2,746,422

$2,430,360

Building

5

Auto

General

GENERAL FUND

Property Tax

Property Tax Collections

• The

City’s property tax rate is 4.31 mills per $1,000 of valuation.

• The mill is placed on the assessed valuation.

• Property tax is up 13.2% due to the increase in assessed valuation and new growth.

$6,000,000 $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Property Tax

06/30/2014 $3,463,858

Intergovernmental Revenues

06/30/2015 $3,250,008

06/30/2016 $4,001,553

06/30/2017 $4,143,927

06/30/2018 $4,690,945

2018 Budget $5,926,647

Intergovernmental Revenues

• Highway Users Tax Fund (HUTF), the City’s share of statecollected gas tax revenue, is down .5% for the second quarter.

• Road and Bridge funds, the City’s share of property tax collected by Jefferson County & Adams County and dedicated to the maintenance of roads and bridges, is up 3.7% for the second quarter.

$6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 HUTF Jefferson County

06/30/2014 $1,567,171

06/30/2015 $1,656,280

06/30/2016 $1,631,703

06/30/2017 $1,674,116

06/30/2018 $1,665,230

2018 Budget $4,242,847

$298,400

$300,818

$348,770

$387,403

$401,793

$860,002

Jefferson County

HUTF

85% of businesses are voluntarily compliant with City tax codes

6

GENERAL FUND

Miscellaneous 0.5% Transfers 26.5%

Expenditure Highlights

Personnel, 44.7%

• Overall

expenditures are down $1,068,571 or 2.5%, when compared to 2017.

• Contract expenses show a decrease of $2,535,112 or 64.1% when compared to 2017. Expenses related to street maintenance were not moved to the streets maintenance fund until the third quarter 2017.

• All major expenditure categories are in line with the 2018 budget.

Debt Service 4.1%

2018 BUDGETED GENERAL FUND EXPENDITURES

Contracts 5.4%

Supplies and Expenses, 5.9%

Services and Charges, 12.9%

Salary and Benefit Salary & Benefits

2018 Budget

Salaries & Wages

$33,019,385

Vacancy Savings

As of 06/30/18

As of 06/30/17

$13,469,230

$13,290,090

-

-

Overtime

1,009,661

440,437

411,696

Group Insurance

6,633,126

2,492,672

2,452,989

Retirement

3,581,623

1,493,267

1,489,980

Medicare

447,461

183,985

175,640

Temporary Wages & Social Security

548,461

273,587

194,499

Other

432,996

212,327

209,456

$44,188,331

$18,565,506

$18,224,351

Total

(1,484,382)

• Notable increases in Expenditures in Public Safety and the City Attorney’s Office represent the bulk of the sizable increase in Temporary Wages & Social Security costs through the first half of the year.

• The primary driver behind Public Safety’s increase was the impact of the City’s transition of dispatch services to JeffCom.

Public Trust - I receive good value for the City taxes I pay

7

STREET MAINTENANCE FUND Street Maintenance Fund Overview The Street Maintenance Fund accounts for costs associated with street repair and replacement including crack sealing, chip sealing, seal coating, milling and overlay and reconstruction. Revenues are derived from the City’s General Fund and the Highway Users Tax Fund which is the City’s share of state-collected gas tax revenue.

The lag in the timing of payments to contractors makes total Expenditures appear more restrained than the reality in the field. Nearly $1.4 million in payments were posted within the first two weeks of July.

Street Maintenance Fund Beginning Fund Balance

2018 Budget

As of 06/31/18

$2,581,000

As of 06/31/17

$2,581,000

REVENUES General Fund Transfer

$9,775,656

$3,425,218

-

-

$9,775,656

$3,436,478

$

-

$6,163,599

$1,808,183

$

-

2,988,412

1,421,280

-

280,164

100,138

-

Other Total Revenues

$

Concrete Replacement Crack Sealing

-

2,785,833

53,873

1,307

Total Expenditures

$12,218,007

$3,383,474

$1,307

Income/(Loss)

(2,442,351)

53,004

(1,307)

Ending Fund Balance

$

Other

138,649

$2,634,004

* This fund was established effective 2017

2018 Milling and Overlay

Time extension approved, APC now has a new completion date of November 30, 2018

Complete:

• Patching - W 74th Dr (Alkire to Devinney Ct)

- Mill and overlay to come

• W 81st Ln (Pomona Dr to Everett Ln)

• Everett St (81st Pl to W 81st Dr)

• W 81st Dr (Everett St to Club Crest)

• Oak St (80th to 76th Dr) Active:

• Patching - Devinney Ct (W 74th Dr to W 72nd Dr)

• Patching - W 78th Ave / Nelson St

• Patching - 57th Ave (Independence to Olde Wads)

- must complete at least portion near school prior to start of school, 8/16

• Coming up - 84th Ave (Simms St to 86th Pkwy)

- must complete at least portion near school prior to start of school, 8/16

Other 1.6%

-

EXPENDITURES Asphalt Replacement

Crack Sealing 2.9%

Estimated dollars spent through Wednesday, July 18, 2018: $3,570,000

8

Concrete Replacement 42.1%

Asphalt Replacement 53.4%

STREET MAINTENANCE FUND

2018 Concrete Replacement Complete:

•"Streets" locations:

- W 67th Ave

- Lake Arbor (Saulsbury Ct and Teller Ct)

• Alta Vista Subdivision

- Estes Ct (Brooks Dr to Alta Vista Dr)

- Everett St (east half) Active:

• Alta Vista Subdivision

- Everett St (west half)

- Field St (east half)

Estimated dollars spent through Wednesday, July 18, 2018: $2,000,000

2018 Crack Seal Complete:

• Effectively, all original contract locations Active:

• Once finished with the original contract areas, Precise Striping will have additional areas added to the project without adding dollars to the project.

These areas include:

- Completing the Fieldstone subdivision (partially completed by City crews in 2017)

- Vacher-Sullivan subdivison (74th - Divinney Ct - 72nd loop off Alkire) - Possibly...

Kipling (80th Ave to 86th Pkwy)

Portions of:  Lake Crest Cottage Homes  MacArthur Plat  Wood Run Filing 2  The Point Filings 3 & 4

Estimated dollars spent through Wednesday, July 18, 2018: $270,000

9

PARKS FUND Parks Fund Overview The Parks Fund accounts for costs associated with the acquisition, design, development, maintenance and beautification of parks, open space and trails within the City. Revenues are derived from the City’s General Fund, Grants Fund, Apex and Jefferson County Open Space funds.

2018 Budget

As of 06/30/18

$5,291,000

$5,291,000

$4,409,252

$1,461,748

$1,336,562

City Cash Transfer

3,371,741

1,673,223

1,648,628

APEX Reimbursement

1,074,647

-

4,686

188,244

210,793

202,471

$9,043,884

$3,345,763

$3,192,347

$9,271,866

$3,623,438

$3,609,075

Parks Fund

Revenue Highlights

• Open Space increased $125,186 or 9.4% over 2017 second quarter.

• All other revenue categories performed as expected.

Beginning Fund Balance REVENUES Open Space

Other Total Revenues

Expenditure Highlights

EXPENDITURES

• Expenditures are in line with 2017 expenditures for the first half of the year.

As of 06/30/17

Ongoing Capital Total Expenditures Income/(Loss)

-

-

-

$9,271,866

$3,623,438

$3,609,075

(227,982)

Ending Fund Balance

$5,063,018

(277,675) $5,013,325

Urban Design. Citywide Household Parks Level of Service (10-minute walk)

10

(416,728)

PARKS FUND

Arvada Parks has partnered with Apex Park and Recreation District on a number of projects at Long Lake Regional Park, Stenger Sports Complex and Lutz Sports Complex.

Long Lake Regional Park improvements include a new synthetic turf field for year-round use, two new lighted baseball fields and a new concession/bathroom facility. Arvada Parks Staff serves on the project coordination team, Arvada Events Staff will manage concessions.

Stenger Sports Complex improvements include a new irrigation system and parking lot improvements completed in conjunction with the Timberline Farms Development. This is the first season of use for the new irrigation system. The new parking lot improvements include landscaping and stormwater detention.

Lutz Sports Complex improvements include a new four-field baseball complex, a new bathroom/concession facility and expanded parking. Arvada Parks Staff serves on the project coordination team and is coordinating the replacement of the irrigation pump and lining of the irrigation pond.

Urban Design. Open Space Per Capita

11

SPECIAL REVENUE FUNDS Special Revenue Funds Overview Special Revenue Funds account for revenues that are to be used for specific purposes. The following funds are considered special revenue funds: • Tax Increment Funds • Community Development • Housing

Tax Increment Funds Overview There are two tax increment funds which account for the voter-approved sales tax increases to fund expanded police services. The first accounts for the .21 cent sales and use tax and the second accounts for the .25 cent sales and use tax. Sources include sales tax, general use tax, auto use tax, building use and interest income. Since the tax increment is in addition to the City’s 3% sales tax, revenue trends in the tax increment fund will closely follow those in the general fund.

Tax Increment Funds Beginning Fund Balance

As of 06/30/17

Revenue Highlights

• The increase in sales tax is due to sales tax receipts in the new Ralston Creek shopping area which opened late 2017.

• Use tax consists of building use tax, auto use tax and general use tax. The decrease in use tax is the result of a 31.4% decrease in building use tax, due to the slowing in building permits

2018 Budget

As of 06/30/18

$12,898,000

$12,898,000

$ 8,362,645

$ 3,471,080

$3,052,027

1,700,547

1,013,085

1,177,087

864,806

230,173

251,179

• The increase in ongoing expenditures is primarily due

$10,927,998

$ 4,714,338

$4,480,293

$ 9,336,977

$ 4,306,990

$3,946,979

to the reclassification of three police officer positions to one commander and two sergeants in 2018 to staff the new Delta station. In addition, there are two less vacancies in 2018 compared to 2017.

• Expenditures in 2018 also include the cost of the public safety records remodel and a portion of the mental health contract.

• The increase in capital expenditures is due to a onetime transfer to the Capital Projects Fund for the purchase of land for the new Delta station and the Vehicle Fund for the purchase of three police vehicles.

REVENUES Sales Tax/Audit Revenue Use Tax Other Total Revenues EXPENDITURES Ongoing Capital Total Expenditures Income/(Loss) Ending Fund Balance

814,404

359,930

7,450

$10,151,381

$ 4,666,920

$3,954,429

776,617

47,418

525,864

$13,674,617

$12,945,418

By 2019, 90% of emergency calls will have less than five (5) minutes response time

12

Expenditure Highlights

SPECIAL REVENUE FUNDS

In association with the 2017-2018 biennial budget and 20172026 10-year Financial Plan, develop a cost-effective plan to provide City services into the northwest area including development and staffing of a new Police Community Station and satellite facilities deemed necessary for other City services.

Development of Delta day and hour schedule for officers and sergeants Have supervisory staff in place for Delta Sector

Identification of location and ground breaking for Delta Community Station Develop a consistent police response for the community in Delta Sector

Delta Community Station Task Timeline

Dec17

Jan18

Feb- Mar18 18

Apr- May- Jun18 18 18

Planning Approval Post Sign Planning Commission - PDP Council Approval - PDP FDP Submittal - 12 Weeks - 1 Review Design Documents 100% CD's Building Dept Permit Review/Approval Fire Dept Permit Review/Approval Bid Solicitation - CMGC RFP issued Bidding Period/Bids Due Evaluation/Selection AIA 133 Agreement - Legal/CMO VE Phase (if required) AIA 201 Exhibit Final GMP - Legal City Council Title Due City Council Packet Due City Council Meeting Approval Construction Issue NTP Building Permit Issued (est.)

Fire Permit Issued (est.)

Construction Start/Completion

Jul18

Aug- Sep18 18

Oct18

Nov- Dec18 18

Jan19

Feb- Mar19 19

Apr- May- Jun19 19 19

The City's focus on strategic planning dictates the need to develop a cost-effective plan for providing services in an area of Arvada that continues to grow in population and businesses. While public safety is a critical aspect of this strategic measure, the City must also consider all other services required.

The City must be prepared to provide services required by new residents and businesses in the northwest area.

Current resources are not adequate for the projected development and resources need to be implemented to align with growth.

13

SPECIAL REVENUE FUNDS

Community Development Overview The Community Development Fund accounts for all entitlements, revenues and expenditures of the Community Development Block Grants (CDBG) program and the Home Rehabilitation program and Essential Home Repairs program.

Community Development Fund

2018 Budget

As of 06/30/18

As of 06/30/17

Beginning Fund Balance

$5,753,000

$5,753,000

$ 114,737

$ 135,863

668,004

221,478

56,695

City Cash Transfer

45,000

22,500

22,500

Interest/Other

34,000

39,254

23,806

Total Revenues

$ 861,741

$ 419,095

$ 188,033

$ 633,376

$ 400,852

$ 287,849

428,397

97,599

118,758

$1,061,773

$ 498,451

$ 406,607

REVENUES Recovered Grants

$

85,032

EXPENDITURES Ongoing Essential Home Repairs Total Expenditures Income/(Loss) Ending Fund Balance

(200,032) $5,552,968

(79,355)

(218,574)

Revenue Highlights

• Overall revenues increased $231,062 or 122.9% over 2017.

• Grants revenue increased due to the Carr Street project.

• A large loan repayment was received during the second quarter 2018.

Expenditure Highlights

• Essential home repairs decreased $21,159 or 17.8% from 2017.

• Eight

essential home repair projects were completed during the first half of 2018 compared to ten projects in 2017.

$5,673,645

The wait list for essential home repairs was at 126 as of June 30, 2018.

Number of Single-family rehab affordable housing grants loans and loan subsidies provided

14

SPECIAL REVENUE FUNDS

Arvada Housing Authority Overview The Authority administers funds received for rent subsidy to low/moderate income households under Section 8 of the U.S. Housing Assistance Payment Program.

Revenue Highlights

• Overall revenues decreased approximately $127,230

Arvada Housing Authority

or 5.8% compared to 2017.

• The decrease is in grant revenue received and is due to an adjustment calculated by the U.S. Department of Housing and Urban Development for administrative expenses.

Beginning Fund Balance

Expenditure Highlights

• Overall

expenditures decreased $29,125 or 1.4% from 2017.

• The Arvada Housing Authority served 473 families during the first half of 2018.

• The Authority is allowed to assist up to 508 families.

2018 Budget

As of 06/30/18

$

74,000

$

$

19,178

$

As of 06/30/17

74,000

REVENUES Recovered Grants

3,928,072

Transfers

15,558

1,995,848

90,041

40,000

$

13,844

2,165,342 -

Interest/Other

1,000

1,161

611

Total Revenues

$4,038,291

$2,052,567

$2,179,797

$ 422,838

$ 145,410

$ 154,264

3,592,317

1,928,228

1,955,384

34,238

23,227

16,342

$4,049,393

$2,096,865

$2,125,990

(44,299)

53,807

EXPENDITURES Ongoing Rents Transfers Total Expenditures Income/(Loss) Ending Fund Balance

(11,102) $

62,898

$

29,702

Number of Families receiving section 8 housing assistance payments on a monthly average

15

CAPITAL IMPROVEMENTS PROJECTS FUND

Capital Improvement Projects (CIP) Fund Overview The Capital Improvement Projects Fund accounts for capital projects for streets, traffic, and parks.

Capital Improvement Fund

2018 Budget

As of 06/30/18

$18,627,000

$18,627,000

$ 5,202,156

$ 5,201,655

$ 7,027,605

Grants and Recovered Costs

-

1,763,461

463,628

Contributions

-

98,132

1,229,903

Interest

-

199,409

124,406

$ 5,202,156

$ 7,262,657

$ 8,845,542

CIP Administration

$ 1,903,045

$ 1,743,831

$ 1,892,798

CIP Street Projects

112,550

1,360,768

379,519

CIP Traffic Projects

13,691,510

776,513

1,014,207

1,033,800

362,920

1,525,874

Total Expenditures

$16,740,905

$ 4,244,032

$ 4,812,398

Income/(Loss)

(11,538,749)

3,018,625

4,033,144

Ending Fund Balance

$ 7,088,251

Beginning Fund Balance

As of 06/30/17

• Transfers

REVENUES Transfers

Total Revenues

Revenue Highlights consist of transfer from the General Fund, Water Fund and Community Development Block Grant Fund.

• Grants and recovered Costs are reimbursements from other agencies or companies that have shared in the cost of a project.

• Contributions reflect transportation tax and park development fees that help fund eligible projects.

EXPENDITURES

CIP Park Projects

$21,645,625

95% Construction projects managed within original contract amount

16

Expenditure Highlights

• Administration

expenditures are related to the construction of the radio tower and the Olde Town restrooms.

• Streets expenditures are related to design and right-of-way purchases for Ralston Road, the guardrail project and Leyden Road improvements.

• Traffic expenditures are related to the traffic signal project at 55th and Kipling and fiber conduit boring to complete the primary backbone of the City’s fiber network.

• Park expenditures are for landscape design services for the Holistic Health and Fitness Park and the Club Crest Trail bridge project.

CAPITAL IMPROVEMENTS PROJECTS FUND Project Updates Fiber Conduit Boring: The City of Arvada completed a conduit master plan in 2017. The master plan identified approximately 55 miles of conduit along with an additional 11 miles to connect anchor institutions such as the City, schools and fire stations. For the first project, the City identified three priority routes that will add about 12 miles of conduit to the already existing 12 miles of conduit. This project is the first step in building out a city-wide communication network that will play a critical role in helping Arvada and its citizens address challenges in safety, mobility and economic vitality, and will provide for future communications needs.

Leyden Road Street Improvements: This project widens approximately 1,500 feet of Leyden Road between Quaker Street and Orion Way. In addition to adding turn lanes, westbound and eastbound bike lanes will also be added to Leyden Road. An eight-foot-wide concrete sidewalk will also be built on the South side of Leyden Road.

Danny Kendricks Park West conceptual design - Star Playgrounds

Playground Equipment: In continuing with the City’s “Taking Lasting Care” initiative, two playgrounds will be replaced in 2018. Danny Kendricks Park West and Farmstead Park have been in service for approximately 20 years. All playground equipment will be replaced, as well as picnic tables, benches and safety surfacing. Danny Kendricks Park West will be completed with a western design and Farmstead Park will be completed with a farm design. The projects are anticipated to be completed by 4th quarter 2018.

Farmstead Park conceptual design - Star Playgrounds

17

ENTERPRISE FUNDS Water Fund Overview The Water Fund accounts for all activities within the scope of the water utility operations including administration, operations, capital water projects, financing and related debt service and billing and collection.

Revenue Highlights

• Revenues from Water Charges were virtually unchanged through the first six months of 2018, with consumption down 2.9%.

• Total Tap Fee sales were down 30.8% versus the same period of 2017, though only down 14.2% for the second quarter.

Water Fund Beginning Fund Balance

2018 Budget

As of 06/30/18

As of 06/30/17

$102,049,000

$102,049,000

$ 21,866,110

$

REVENUES Water Charges

6,660,369

$ 6,649,787

Tap Fees

13,316,182

3,656,384

5,283,403

Interest

508,100

531,144

362,991

1,182,424

793,440

1,395,079

$ 36,872,816

$ 11,641,337

$13,691,260

$ 18,934,044

$

$ 7,808,143

Other Total Revenues EXPENDITURES

Expenditure Highlights

• Personnel

expenditures were up 3.2% versus the same period of 2017.

• The uptick in Major Capital Maintenance expenditures was due to the timing of payments on water main replacement contracts.

• System improvements in the northwest and security improvements at the treatment plants were behind most of the jump in Capital Expenditures.

Ongoing

8,017,498

Debt Service

2,261,000

-

-

Major Capital Maintenance

6,687,912

1,455,868

643,968

11,537,597

1,029,440

57,126

$ 39,420,553

$ 10,502,806

$ 8,509,237

1,138,531

5,182,023

Capital Total Expenditures Income/(Loss)

(2,547,737)

Ending Fund Balance

$ 99,501,263

$103,187,531

*$34,397,330 of the Fund Balance is a cash escrow reserved in Denver Water’s name and related to the Gross Reservoir expansion. The Water Fund’s overall obligation is expected to total $110 million through 2025.

Quality of drinking water

18

ENTERPRISE FUNDS

Wastewater Fund Overview The Wastewater Fund accounts for all activities necessary in the collection, transmission and disposal of sewage and wastewater.

Wastewater Fund Beginning Fund Balance

2018 Budget

As of 06/30/18

As of 06/30/17

Revenue Highlights

• Sewer

$12,248,000

$12,248,000

$12,391,479

$ 5,527,028

$ 5,477,213

Tap Fees

1,012,314

459,142

614,366

Interest

314,682

228,954

206,266

1,047,128

217,289

205,018

$14,765,603

$ 6,432,413

$ 6,502,863

REVENUES Sewer Charges

Other Total Revenues

Expenditure Highlights

EXPENDITURES Metro District

$ 8,897,606

$ 3,915,124

$ 4,448,803

Ongoing

3,308,268

1,456,077

1,426,293

Major Capital Maintenance

3,611,161

1,137,106

54,716

Capital

3,784,581

151,368

-

$19,601,616

$ 6,659,675

$ 5,929,812

Total Expenditures Income/(Loss) Ending Fund Balance

Tap Fee revenue through the first six months of the year was down 25.3%, though down only 6.3% for the second quarter • Sewer Charges were up 0.9% through June.

(4,836,013) $ 7,411,987

(227,262) $12,020,738

573,051

• Treatment charges from the Metro Wastewater Reclamation District were down 12.0% versus 2017, which was due to a lagging calculation of inflow estimates by Metro for Arvada’s sewer system.

• Timing on sewer main replacement contracts and work infilling the City’s sewer main system into Star Acres and Oberon Acres caused the increase in Major Capital Maintenance and Capital, respectively, through June.

66% of the sanitary sewer system will be cleaned annually (industry standard is 33%)

19

ENTERPRISE FUNDS

Stormwater Fund Overview The Stormwater Fund accounts for all activities necessary to maintain a stormwater management plan.

Revenue Highlights

• The

City’s Stormwater Utility Fee was left unchanged for 2018. Increases in revenue are reflective of the housing growth.

Stormwater Fund

2018 Budget

Beginning Fund Balance

$7,532,000

$7,532,000

• The jump in Ongoing Expenditures was due to progress on various miscellaneous drainage projects throughout the City, which were approved in November of last year.

As of 06/30/17

$3,370,427

$1,739,137

$1,702,514

71,927

67,088

111,069

$3,442,354

$1,806,225

$1,813,583

$2,205,881

$1,260,592

$871,887

867,769

433,884

429,949

1,731,254

-

177,468

$4,804,904

$1,694,477

$1,479,304

111,748

334,279

REVENUES Stormwater Fee Other Total Revenues

Expenditure Highlights

As of 06/30/18

EXPENDITURES Ongoing Debt Service Capital Total Expenditures Income/(Loss)

(1,362,550)

Ending Fund Balance

$6,169,450

$7,643,748

95% of stormwater urgent response events will have 90 minutes of being notified.

reporting staff on site within

20

ENTERPRISE FUNDS

Golf Fund Overview The Golf Course Fund accounts for all revenues and expenses of the Lake Arbor and West Woods Golf Courses, including food service operations.

2018 Budget

Golf Fund Beginning Fund Balance

$

477,000

As of 06/30/18 $

• Golf Course revenue increased $124,989 or 9.9% over the first

As of 06/30/17

six months of 2017. All 27 holes are open in 2018 compared to only 18 for all of 2017.

• Restaurants revenue increased $345,318 or 84.8% over the first six months of 2017. Lake Arbor Restaurant remained closed for remodeling during the second quarter of 2018. West Woods Restaurant opened March 20, 2018 after being closed during the second, third and fourth quarters of 2017.

• Overall revenues decreased $1,611,331 or 39.1% the first half of 2018 when compared to 2017. This is due to a one-time transfer in 2017 from the Conservation Trust for the West Woods Golf Clubhouse remodel and irrigation system replacement.

477,000

REVENUES Golf Courses

$3,741,016

$1,384,658

$1,259,669

Restaurants

1,836,468

752,610

407,292

Construction Revenue

870,164

1,697

2,176,500

City Cash Transfer

492,560

371,780

278,613

$6,940,208

$2,510,744

$4,122,075

Golf Courses

$2,438,936

$ 844,771

$1,041,084

Restaurants

1,661,852

782,355

492,857

Administration

1,671,352

755,259

433,664

Capital

2,627,706

1,725,098

1,778,689

$8,399,846

$4,107,483

$3,746,295

Income/(Loss)

$(1,459,638)

$(1,596,739)

Ending Fund Balance

$ (982,638)

$(1,119,739)

Total Revenues EXPENDITURES

Total Expenditures

Revenue Highlights

Expenditure Highlights

• Overall expenditures for the first six months of 2018 increased $361,188 or 9.6% over the same period in 2017.

$375,780

• Restaurant expenses increased $289,498 or 58.7% over the first half of 2017. West Woods Restaurant was closed for remodeling the second quarter of 2017 and reopened late in the first quarter 2018.

• Administrative expenses increased $321,595 or 74.2% over 2017. This is due to the payment of the golf cart lease and the re-payment of the loan to Wastewater for the irrigation system replacement beginning in the second quarter of 2018.

By 2019, West Woods club house and related facilities are replaced

Golf Rounds by Type - January - June Westwoods

21

2017

Variance

4,367

13,013

1,354

Super Users Annuals

2,876

2,760

116

4%

578

1,398

(820)

(59%)

Tournament

use bho e of u l s fC Gol lubhou ory. s d oo teg ’s C st W gazine tion ca pain. e S W a a ned Inc. M renov use in g i s ho lic de olf wly d in G he pub s a club e. e n t r n The d seco rds in ner wa t it he a u e in plac ear aw lace w all abo Y p d e th Rea first The

2018

Player Support

Grow the Game Total Lake Arbor Player Support Super Users Annuals Tournament Grow the Game Total

10%

166

53

113

213%

17,987

17,224

763

4%

2018

2017

10,183

11,450

1,267)

(11%)

6,003

6,854

(851)

(12%)

Variance

362

472

(110)

(23%)

98

219

(121)

55%)

16,646

18,995

(2,349)

(12%)

ENTERPRISE FUNDS

Food Services Fund (Arvada Events) Overview The Food Services Fund accounts for all revenue and expenses associated with food service activities including the operation of banquet facilities at the Arvada Center for the Arts and Humanities and off-site catering.

Food Services Fund (Arvada Events)

2018 Budget

As of 06/30/18

As of 06/30/17

Beginning Fund Balance

$ 637,000

$ 637,000

$

27,463

$ 106,597

1,599,449

966,209

671,592

$1,626,912

$1,072,806

$ 685,870

$ 380,008

$ 168,472

$ 180,493

1,218,848

568,158

503,170

18,034

-

$1,616,890

$ 736,630

$ 683,663

10,022

336,175

2,207

$ 647,022

$ 973,175

REVENUES Concession Services Banquet and Guest Services Total Revenues

$

14,278

EXPENDITURES Administration Operations Capital Total Expenditures Income/(Loss) Ending Fund Balance

Hospitality. Sales. Revenues per Market Segment.

-

Revenue Highlights

• Overall revenues saw an increase of $386,936 or 56.4% over 2017. This is due to a one-time transfer from the General Fund for items related to the transition of the Arvada Center to the stand-alone not for profit.

• Arvada Events exceeded 2017 second quarter revenue by $124,192 or 19.1%. April 2018 proved to be a record month as many new groups were served by Arvada Events.

Expenditure Highlights

• Overall expenses saw a slight increase of $52,967 or 7.8% over 2017.

22

ENTERPRISE FUNDS

Events by Market Segment January - June

ARVADA CENTER

2018

2017

Variance

Arvada Center

10

-

10

100%

Association

37

29

8

28%

Corporate

38

40

(2)

(5%)

Education

16

15

1

7%

Fraternal

48

49

(1)

(2%)

5

10

(5)

0%

In-house

15

13

2

15%

Religious

28

32

(4)

(13%)

Social

13

12

1

8%

3

2

1

50%

213

202

11

5%

Government

Wedding/Anniversary Total WEST WOODS

2018

2017

Variance

Association

-

1

(1)

0%

Corporate

2

-

2

0%

Fraternal

2

-

2

0%

In-house City

5

3

2

67%

Social

5

2

3

150%

7

3

4

0%

21

9

12

133%

Golf Tournaments Total LAKE ARBOR

2018

2017

Variance

Social

1

-

1

0%

Golf Tournaments

6

6

-

0%

Total

7

6

1

0%

Fraternal 20.7%

Education 6.6% Corporate 16.6%

Government 2.1%

In-house City 8.3%

Association 15.3%

Religious 11.6%

Arvada Center 4.2% Wedding/ Anniversary 1.0%

Golf Tournaments 5.7%

23

Social 7.9%

INTERNAL SERVICE FUNDS

Internal Service Funds Overview There are five Internal Service Funds – Insurance Fund (Risk Management), Computer Fund, Print Services Fund, Vehicles Fund and Building Fund. Internal Service Funds charge internal programs and departments for use of goods and services. The Funds then pay for all associated costs of things such as purchasing insurance, vehicle purchases and maintenance, computer purchases and maintenance, and buildings maintenance.

Insurance Fund Overview The Insurance Fund, administered by the Risk Management Program of Finance, accounts for the City’s self-insurance against loss. It is funded with contributions by all City departments and programs based on their levels and types of exposure. The Fund is also used for loss prevention programs, the protection of City personnel and the preservation of City property and assets.

2018 Budget

Insurance Fund Beginning Fund Balance

$1,093,000

$2,101,505

$1,061,734

$1,054,185

65,700

31,942

53,778

Other

1,000,000

1,078,618

48,584

Total Revenues

$3,167,205

$2,172,294

$1,156,547

$1,834,682

$609,343

$1,837,543

REVENUES Contributions Interest

EXPENDITURES Risk Management Operations

• Overall

revenues increased $1,015,247 or 87.8% over 2017. A one-time transfer from the General Fund attributes to this increase.

As of 06/30/17

$1,093,000

Risk Management Administration

Revenue Highlights

As of 06/30/18

Total Expenditures Income/(Loss) Ending Fund Balance

500,163

159,462

203,238

$2,334,845

$768,805

$2,040,781

832,360

1,403,489

(884,234)

$1,925,360

$2,496,489

$(884,234)

*Per GASB Statement 10, an additional $2,299,595 in cash is currently held in the Risk Management fund to cover potentially incurred liabilities as of the beginning of the year. This figure was reached by the Risk Management’s actuary for 2017.

Expenditure Highlights

• Overall expenditures decreased $1,271,976 or 62.3% from the first six months of 2017.

• The first six months of 2018 have not experienced the level of liability claims paid in 2017. Expenditures are expected to increase throughout the year as repairs are made for building and property damage resulting from the May 2017 hail storm.

Workers Compensation Insurance Data

24

INTERNAL SERVICE FUNDS

Computer Fund Overview The Computer Fund provides resources for both ongoing maintenance and replacement of the City’s computers, network hardware, and other electronic infrastructure. It is funded with contributions by all City departments based on their levels of use of this technology.

Computer Fund

2018 Budget

Beginning Fund Balance

$7,144,000

As of 06/30/18

As of 06/30/17

$7,144,000

• Maintenance

REVENUES Maintenance

$1,195,180

$ 598,190

$ 598,063

Replacement

1,070,551

611,521

499,387

85,787

73,632

61,788

$2,351,518

$1,283,343

$1,159,238

Maintenance

$1,277,644

$ 744,835

$ 640,609

Replacement

886,408

295,162

265,235

$2,164,052

$1,039,997

$ 905,844

187,466

243,346

253,394

$7,331,466

$7,387,346

Other Total Revenues EXPENDITURES

Total Expenditures Income/(Loss) Ending Fund Balance

Revenue Highlights

90% of survey respondents indicate that they were satisfied with ITMs response to their request for service on their business system

25

revenue is comparable to the previous year.

• The increase in replacement revenues is due to a one-time transfer from the General Fund for the purchase of a fiber asset management tool.

• Other revenue includes interest income and income from the rental of space at a radio tower.

Expenditure Highlights

• The majority of replacement expenditures are related to the replacement of desktop and laptop computers.

• The increase in maintenance expenditures is related to the timing of payments for maintenance products.

INTERNAL SERVICE FUNDS

Vehicles Overview The Vehicles Fund provides resources for the maintenance and replacement of City vehicles and heavy equipment. It is funded with contributions by all City departments based on their vehicle inventory and use.

Vehicles Fund Beginning Fund Balance

2018 Budget

As of 06/30/18

$4,047,000

$4,047,000

As of 06/30/17

Revenue Highlights

• Other Revenues include recovered costs from auctioning

REVENUES Maintenance Contributions

$2,391,896

$1,216,786

$1,160,176

Replacement Contributions

1,592,992

816,639

764,678

280,604

529,051

161,051

$4,265,492

$2,562,475

$2,085,904

Maintenance

$2,468,636

$1,188,085

$1,159,054

Replacement

3,572,056

766,547

418,582

$6,040,692

$1,954,632

$1,577,636

607,844

508,268

Other Total Revenues

retired vehicles and equipment, as well as transfers from other Funds for the cost of new acquisitions.

Expenditure Highlights

EXPENDITURES

Total Expenditures Income/(Loss)

(1,775,200)

Ending Fund Balance

$2,271,800

• The

jump in Replacement Expenditures was due to the timing of when new vehicles and equipment were received.

Purchases are not reflected in expenditures until the City takes actual possession of the vehicle or equipment.

$4,654,844

By 2019, 60% of the City’s fleet will be capable of using alternative fuel sources

26

INTERNAL SERVICE FUNDS

Print Services Fund Overview The Print Services Fund provides ongoing operational support for the City’s printing needs.

Print Services Fund Beginning Fund Balance

2018 Budget

As of 06/30/18

As of 06/30/17

Revenue Highlights

$224,000

$224,000

$200,000

$119,380

$114,776

145,975

79,286

78,087

$345,975

$198,666

$192,863

• Print shop and copier revenue is comparable to the

REVENUES Print Shop Copiers Total Revenues

prior year.

Expenditure Highlights

EXPENDITURES Print Shop Copiers

$256,504

$108,246

$114,018

74,500

38,742

36,623

-

-

23,034

$331,004

$146,988

$173,675

14,971

51,678

19,188

$238,971

$275,678

Equipment Total Expenditures Income/(Loss) Ending Fund Balance

• Print shop expenditures are slightly lower than the prior year. lease payment for the copiers comprises the majority of copier expenditures.

• No equipment purchases are planned in 2018.

• The

Buildings Fund Overview The Buildings Fund provides resources for maintaining major portions of facility infrastructure as replacement becomes necessary. The primary types of infrastructure are HVAC equipment, parking lots, roofs, and carpet. It is funded with contributions by all City departments based on their facility occupancy.

Buildings Fund Beginning Fund Balance

2018 Budget

As of 06/30/18

$3,133,000

$3,133,000

As of 06/30/17

• Replacement

REVENUES Replacement Transfers Other Total Revenues

Revenue Highlights

$ 529,446

$ 213,893

$ 207,663

36,000

25,302

43,542

$ 565,446

$ 239,195

$ 251,204

Transfers increased by 3.0% across all contributing Funds for 2018.

Expenditure Highlights

EXPENDITURES Personnel Replacement Total Expenditures Income/(Loss) Ending Fund Balance

72,115 $ 436,587

$

381

381

10,998

$ 191,434

$508,702

$11,379

$ 191,815

56,744

227,816

59,389

$3,189,744

$3,360,816

27

• The

Personnel Expenditures represent a single FTE first budgeted for the Fund in 2015. These Expenditures reflect monthly contributions to Risk Management for Workers Compensation coverages for that FTE.

ARVADA ECONOMIC DEVELOPMENT ASSOCIATION (AEDA) Overview AEDA was established to encourage and stimulate all forms of economic development – commercial and industrial. The services provided by AEDA benefit both the City and citizens by providing information and services to existing and prospective businesses and industries. AEDA is funded by a transfer from the General Fund for services it renders to the City and its citizens. The City also provides administrative support for AEDA. A Board of Directors appointed by City Council governs AEDA.

Operations

2018 Budget

Beginning Fund Balance

$267,000

$267,000

Revenues

808,509

408,318

411,898

Expenditures

803,708

335,602

340,639

$271,801

$339,716

Ending Fund Balance

As of 06/30/18

As of 06/30/17

Revenue Highlights

• Revenue consists of a transfer from the general fund equal to the operating expenditures, including personnel.

Expenditure Highlights

• Expenditures in the second quarter are comparable to the prior year.

By 2019, 800 new non-retail jobs from businesses will be created within the following targeted industries: medical, manufacturing, research and development, bio-medical, energy, enabling technology, and professional services

28

ARVADA ECONOMIC DEVELOPMENT ASSOCIATION (AEDA)

Program

06/30/2018

Beginning Cash Balance Revenues

1,499

Revenue Highlights

• Revenues consist of interest revenue.

• No City contribution is planned for 2018.

78,321

Expenditures Ending Cash Balance

$528,096

Reserved for Economic Impact Fund

$(290,000)

Reserved for Arvada Manufacturing Initiative

(20,300)

Reserved for Targeted and Professional Services

(5,902)

Reserved for Chamber Talent Pipeline Management Program

(5,000) (130,000)

Commitments Available Unallocated Cash Balance

$76,894

Vacancy rates

29

Expenditure Highlights

• Four small business grants were paid in the second quarter for a total of seven grants in 2018.

• Grants help businesses improve signage, landscaping, facades and site improvements.

• Commitments represent ten small business grants.

CITY OF ARVADA INVESTMENT REPORT

Investment Portfolio Objectives Pursuant to the City’s investment policy, the primary objectives of the City’s investment activities, in priority order are safety, liquidity and yield.

Consistent with this policy, the portfolio of securities is invested in U.S. Treasuries, U.S. Agencies, local government investment pools (LGIPs), Bank CDs, commercial paper, and corporate debt. All security types are subject to the concentration limits and credit ratings established by the City’s investment policy. The City-managed investment portfolio is administered to provide sufficient liquidity to meet all reasonably anticipated operating cash needs without selling securities prior to maturity. The portfolio controlled by PFM is actively managed which means that investments may be sold prior to maturity and reinvested in order to achieve the desired duration, yield or diversification of the portfolio.

PORTFOLIO CHANGES Par Value as of 06/30/18 MM/Savings/Cash

$6,440,139

$3,279,943

$3,160,196

LGIP

28,329,907

35,961,256

(7,631,349)

Time CD

6,941,544

9,972,760

(3,031,216)

Corporate

17,992,000

18,992,000

(1,000,000)

US Agency

101,750,000

83,750,000

18,000,000

US Treasury

12,000,000

6,000,000

6,000,000

$173,453,590

$157,955,959

$15,497,631

Subtotal - City

PFM-MANAGED PORTFOLIO Negotiable CD

$2,000,000

$2,000,000

Corporate

7,790,000

6,680,000

US Agency

5,000,000

5,500,000

US Treasury

34,620,000

35,130,000

(510,000)

Subtotal - PFM

$49,410,000

$49,310,000

$100,000

1,110,000

(500,000)

MM/Savings/Cash

$6,440,139

$3,279,943

$3,160,196

LGIP

28,329,907

35,961,256

(7,631,349)

Time CD

6,941,544

9,972,760

(3,031,216)

Negotiable CD

2,000,000

2,000,000

Corporate

25,782,000

25,672,000

110,000

US Agency

106,750,000

89,250,000

17,500,000

US Treasury

46,620,000

41,130,000

5,490,000

$222,863,590

$207,265,959

$15,597,631

Total - Combined

CONSOLIDATED PORTFOLIO ALLOCATION

-

CONSOLIDATED MATURITY DISTRIBUTION

24.8%

LGIP 12.7% Time CD 3.1%

25.0% 20.0%

20.4% 16.0%

15.0%

Negotiable CD 0.9% US Agency 47.9%

$

CONSOLIDATED PORTFOLIO

The City’s portfolio is positioned on the shorter end of the curve to be able to take advantage of increased future earnings from higher reinvestment rates.

The City-managed portfolio has increased by more than $15 million when compared to the second quarter of 2017. The allocation of investments slightly shifted from short-term liquid instruments like LGIPs and CDs to Agencies and Treasuries with higher rates. Consolidated maturity distribution continues focusing on three years and under maturity buckets. As the Treasury curve flattens there is not enough incentive to go further out on the yield curve.

US Treasury 20.9%

Difference

CITY-MANAGED PORTFOLIO

The Federal Open Market Committee (FOMC) raised the interest rates by 0.25% in their June meeting, which put the federal target range at 1.75 – 2.00%. The U. S. Treasury yield curve flattened noticeably through May, as short-term yields rose while long-term yields fell. The spread between 2-year and 10-year Treasury yields is the lowest since 2007. The Federal Reserve also continues its quantitative tightening with several billion dollars of bonds per month coming due. The central bank is not buying new bonds when the current holdings mature, letting bonds roll off its balance sheet.

MM/Savings/Cash 2.9%

Par Value as of 06/30/17

15.1%

13.4%

10.2%

10.0%

Corporate 11.6%

5.0% 0.0%

0-.25

.25-1

1-2

2-3

Maturity (years) 30

3-4

4-5

CITY OF ARVADA INVESTMENT REPORT

The average yield on the City-managed and PFM-managed portfolios through the second quarter of 2018 was 1.62% and 1.41% respectively. The total interest earnings for the first half of the year were $1,696,014, an increase of $548,952 in comparison with 2017. In the second quarter, the City’s investments underperformed the benchmark by 66 bps as the City does not rebalance the entire portfolio every month. The City’s investment strategy is to buy and hold to maturity, which at times may cause the performance of the City’s portfolio to fall behind the benchmark, particularly in a rapidly rising interest rates environment.

The City’s investment portfolio reflects a significant amount of unrealized loss which was expected. When interest rates go up, the value of the current bonds with lower coupon payments goes down. This is not a concern, since the City holds investments until maturity and the bonds are paid back at par (face value) upon maturity.

The safety of the City’s investments is our first priority. Over 90% of the investments in the portfolio are rated AA+ or AAA by the Standard & Poor’s credit rating agency.

PORTFOLIO PERFORMANCE

PORTFOLIO CHARACTERISTICS

06/30/2018

06/30/2017

Difference

City Interest Earnings

$1,390,188

$877,697

$512,491

Duration to Maturity (yrs)

PFM Interest Earnings

305,826

269,365

36,462

Yield to Maturity at Cost

1.807%

1.570%

Total Interest Earned

$1,696,014

$1,147,062

$548,952

Yield to Maturity at Market

2.588%

2.580%

YTD City Portfolio Yield

1.62%

1.20%

+42 bps

YTD PFM Portfolio Yield

1.41%

1.22%

+19 bps

YTD Benchmark

2.28%

1.31%

+97 bps

City

Par Value

$173,453,590

PFM $49,410,000

1.87

2.31

CREDIT QUALITY (S&P RATING) AA+ 77.2%

ACCOUNT SUMMARY City

PFM

Total $222,863,590

Book Value

173,597,013

49,556,395

223,153,408

Market Value

171,155,814

48,505,038

219,660,852

Unrealized Gain /(Loss)

$(2,441,200)

$(1,051,357)

$(3,492,556)

AAA 16.0% A-1 .9%

A-1+ 0.5%

AA4.3%

AA 1.1%

Investment Management Focus - 2018 Jerome Powell, the newly appointed Chair of the Federal Reserve, is expected to continue Yellen’s gradual approach towards monetary tightening. The Federal Open Market Committee (FOMC) forecasts one or two more rate hikes in 2018.

The City will continue to focus on diversification of maturities. A portion of the portfolio is kept in LGIP, money markets, and cash balances at levels to meet operating needs and capture attractive interest rates. The City will continue to use a blended strategy, which calls for emphasis in short-term positions as well as some long-term positions (five years in the City’s case), but also staggering maturities in between to smooth the revenue stream. This will allow ample cash should the City experience unexpected needs and allow us to take advantage of better coupons in longer maturity buckets.

The U.S. Agencies’ spreads are still tight. Callable securities normally get better yield. (Call provisions are a tool used by issuers to refinance debt at a more attractive rate.) In the rising interest rates environment, the risk of securities being called decreases; therefore, the focus will be to take advantage of the option-adjusted spreads of callable securities. A combination of callable and non-callable securities will allow us to enhance investment income over the LGIP funds and not subject the City’s portfolio to excessive turnover if interest rates fall.

31

S. Nalbach