Issuu

Financial Report

Year-End 2017

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 Deanne Gibboney, Budget Analyst Debra Nielson, Controller Vesta Weinhauer, Treasury Analyst 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 Print Services Fund............................................................................................................ 26 Vehicle Fund...................................................................................................................... 27 Buildings Fund................................................................................................................... 27 Arvada Economic Development Association (AEDA)...........................................................28-29 City of Arvada Investment Report...................................................................................... 30-31

OVERVIEW

2017 Year-End 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 current economic expansion is the now the second longest on record. Consumer confidence is at the highest level it has been since 2000 with the shortterm outlook being the most optimistic. The Federal Reserve raised interest rates in December 2017 and again in March 2018. Gross Domestic Product (GDP) growth has been steady, with 2017 registering a modest increase of 2.6%. The 2018 Tax Reform Bill was signed into law in December, lowering corporate and individual income taxes. All signs point to the larger economy continuing the slow but steady growth pattern. Colorado continues to have one of the strongest local economies in the United States. Unemployment ended the year at 3.0% statewide and 2.7% for Arvada, with a slight uptick in the fourth quarter. Sales tax receipts closed out the year on a high note up 5.6%. The 16 sales tax categories that the City currently tracks were all up over 2016 with the largest growth experienced in Fast-Casual Restaurants, up 11.5%, and Retail Hardware, up 9.3%. By geographical area, sales tax was more of a mixed bag with eight of the thirteen areas up and five down. The area with the largest percentage growth from 2016 to 2017 was Olde Town, up 25.6%!

Annual Sales Tax Growth (%) 10.0%

7.5% 5.9%

5.0%

6.2%

5.9%

5.1%

5.6%

3.1%

0.6% 0.0%

‐3.8% ‐5.0% Percentage Growth

2009 ‐3.8%

2010 0.6%

2011 3.1%

2012 5.9%

2013 5.9%

2014 7.5%

2015 6.2%

2016 5.1%

2017 5.6%

With three short-term interest rate increases in 2017, interest income was up 44.1% to $2.6 million. Year-to-date yield sat at 1.3%, the highest number since 2008. With three more rate hikes planned for 2018, interest income should continue to rise. If there was a crack in the armor in 2017 it was single-family building permits. Issuances of new single-family permits fell to the lowest annual level since 2013, coming in at 496 for 2017. This was a reduction of 244 permits compared to 2016. Even with the reduced number of permits, overall building revenues were up 3.7%. Commercial permits and a substantial increase in roofing permits, due to the May 8 hail storm, accounted for the increase. Population growth, continued repairs and escalated new car values generated a 19.2% increase in auto use tax over 2016. Both nationally and at the state level, new car sales were down compared to 2016; however, this was not the case in Arvada. The residents like their cars! The new Street Maintenance Fund completed its first year in existence. A total of $9.8 million dollars was spent in the four categories Asphalt Replacement, Concrete Replacement, Crack Sealing and Other. Work was completed on 46 streets and three complete neighborhoods. A detailed listing of the locations can be found in the Street Maintenance section of this document, and the information is also available on the City’s website.

OVERVIEW

The Parks Fund has changed its focus from building new parks to revitalizing older parks. Current projects include Stenger, Lutz and Fitzmorris. The plan is to renovate two to three parks per year. With well over 100 parks in the City, this will be a long-term commitment. The police department continues its work on the Delta Station and the transition of to Jeffcom. The design of the Delta station is complete with the construction solicitation out on the street. Construction is expected to commence in the summer of 2018 and take approximately one year. Hiring efforts are ongoing in order to be ready to staff this station when it opens. Ten City of Arvada dispatchers transitioned to Jeffcom in late March. The centralized emergency dispatch call center will handle 911 calls and dispatch emergency responders for eight previously independent entities. The number of housing subsidies the Arvada Housing Authority can offer continues to go down. At the end of 2017, 441 families were receiving a subsidy, down from 484 families in 2016. This is out of a possible 508. There is a small light at the end of the tunnel as housing staff was made aware of an opportunity that might increase their funding an additional 20.0%. This would reverse the downward trend and would create a much-needed subsidy for additional families. Five capital improvement projects are highlighted this month – Arvada Holistic Health and Fitness Park, Fitzmorris Recreation Center, Ralston Road Construction – Upham Street to Yukon Street, West Woods Golf Clubhouse and Indiana Street and West 72nd Avenue. Please take the opportunity to read about some of the new and exciting projects the City has in the works. The West Woods Golf Course clubhouse expansion and irrigation system replacement projects were completed in early 2018, just in time for golf season. Patrons will have the opportunity to enjoy a new golfer’s porch, updated kitchen and bar areas, state-of-the-art golf simulator and a larger putting practice green. The new irrigation system will allow the course to stay green while improving water usage. Next on the capital projects list is the remodel of the Lake Arbor bathrooms, restaurant and bar area. This project is underway and should be completed by summer. The City of Arvada and most of its funds ended 2017 in excellent financial shape. Revenue growth, above budget, in sales tax, auto use tax, building use tax and property tax will generate funds that can be used for one-time projects and to balance the ten-year model. Opportunities to enhance the services provided by the City will be looked at during the 2019-2020 budget process. A continued focus will be put on street maintenance as additional funding is needed to maintain the over $3 billion dollar asset. City Council has identified additional strategic results around attainable housing and senior housing in an attempt to begin to address the ever-evolving citizen needs.

Rick Assmus

R. Assmus

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

2017 Budget

2017 Actual

$41,397,000

$89,343,000

$98,753,137

$86,107,437

$84,312,839

11,019,156

684,254

400,000

$97,810,847

$95,731,995

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

(8,467,847)

Ending Fund Balance

3,021,142

$32,929,153

$44,418,142

• The General Fund will end with a fund balance of $44 million, $28 million over the Council-required fund balance reserve of 17% • $1,802,492 of this balance will be used for projects not completed in 2017 • $1,500,000 of this balance will be used for the Delta Sector Police Station • $250,000 will be used for the Street Maintenance program • $5,142,200 will be used toward additional one-time items • The remaining balance will be used for ongoing operations, to balance the 10-year financial plan and maintain the Council-required 17% fund balance reserve

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 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017

GENERAL FUND Sales Tax 47.9%

Revenue Highlights

• All revenue sources, with the exception of interest and franchise fees, were up over 2016 • All revenue sources except interest and court fines and fees exceeded their budgets • Interest is down due to moving of the streets maintenance activities and fund balance to its own fund • Franchise fees are down from 2016 by 16,237 or .4% • Major revenue categories of sales tax, use tax, property tax, building and intergovernmental revenues are discussed in more detail in the “Revenue Highlights” section • A loan payback of $2 million was received in 2017

2017 ACTUAL GENERAL FUND REVENUES

Property Tax 5.7%

Use Tax 1.8%

Auto Use Tax 8.6%

Other 17.2%

Interest .5%

Sales Tax

Building Use Tax & Permits 12.2% Court Fines & Fees 1.8%

Franchise Fees 4.3%

Sales Tax Collections

• Sales tax is up 5.6% from 2016 reflecting sales tax collection increases for nine straight years (2009-2017)

• All sales tax categories are up from 2016, with the largest

$60,000,000

categories being fast-casual restaurants and retail hardware

$50,000,000

• 8 of the 13 sales tax geographical areas increased 5.9% or $1,698,000, with Olde Town leading the way with a 25.6% increase in one year! • 5 of the 13 geographical areas decreased 6.8% or $474,000

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

2013 Sales Tax $40,205,021

Use Tax Building Use Tax • Building use tax increased 3.1% over 2016 • Reflects continued growth in the western part of Arvada and increased roofing permits due to the May 2017 hail storm • Budget is based on an historical average number of permits; excess revenues over budget will be reserved to fund one-time projects or added to the fund balance Auto Use Tax • Auto use tax increased 19.2% from 2016 and exceeded the 2017 budget by $2,100,000 • Increase in auto use tax driven by the May 2017 hail storm General Use Tax • General use tax is up 37.9% from 2016 and exceeded the 2017 budget by $178,000, primarily due to one-time use taxes from a large retailer

2014 $43,211,510

2015 $45,642,944

2016 $48,111,671

2017 $50,986,986

Use Tax Collections $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 General

2013 $1,554,343

2014 $1,533,818

2015 $1,598,995

2016 $1,312,887

2017 $1,811,571

Auto

$5,379,579

$5,982,520

$6,973,208

$7,162,404

$8,540,345

Building

$2,884,866

$4,431,197

$5,215,500

$6,799,066

$7,007,517

Building

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 • Actual collections increased 1.3% from 2016 and are slightly above the 2017 budget

$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

2013 $4,556,940

Intergovernmental Revenues

2014 $4,600,995

2015 $4,668,082

2016 $5,583,064

2017 $5,654,004

Intergovernmental Revenues

• Highway Users Tax Fund (HUTF), the City’s share of statecollected gas tax revenue, is up 1.5% from 2016 • 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 8.9% from 2016

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

2013 $3,847,443

2014 $3,949,386

2015 $4,134,398

$718,844

$730,239

$734,993

Jefferson County

2016 $4,123,134

2017 $4,182,792

$799,693

$870,641

HUTF

85% of businesses are voluntarily compliant with City tax codes

GENERAL FUND

Miscellaneous 1.6%

Expenditure Highlights

Transfers 26.9%

Personnel, 42.9%

• Total expenditures showed a savings of approximately $2 million • Carryovers of $1,802,492 make up the majority of this savings • $12,130,686 was transferred to the Streets Maintenance fund • An additional cash transfer of $404,000 to the Arvada Center was made in June 2017

Debt Service 3.8%

2017 ACTUAL GENERAL FUND EXPENDITURES

Contracts 6.2%

Supplies and Expenses, 5.7%

Services and Charges, 12.7%

Salary and Benefit • Savings from retirements and vacancies held down Salary and

Salary & Benefits

2017 Budget

2017 Actual

Salaries & Wages

$32,513,712

$30,473,398

Vacancy Savings Overtime

(1,331,711)

977,404

931,987

Group Insurance

6,496,829

5,592,411

Retirement

3,574,609

3,399,706

Medicare

428,310

406,040

Temporary Wages & Social Security

526,780

536,541

Other

434,899

437,006

$43,620,832

$41,777,089

Total

Wage Expenditures through the end of the year • Year-over-year decreases in Overtime and Temporary Wage expenditures helped to keep the total increase in General Fund Personnel expenditures for 2017 at 1.4%

8% or less annual healthcare premium increases over the previous year

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. 2017 Budget

Street Maintenance Fund Beginning Fund Balance

2017 Actual -

Crack Sealing 2.4%

REVENUES General Fund Transfer

$12,130,686

151,337

$12,130,686

$12,282,023

$ 6,600,000

$ 6,010,480

3,200,000

3,554,658

300,000

239,125

Other Total Revenues

Other 0.5%

Concrete Replacement 36.1%

Asphalt Replacement 61.0%

EXPENDITURES Asphalt Replacement Concrete Replacement Crack Sealing

2,029,188

43,629

$12,129,188

$ 9,847,891

1,498

2,434,131

1,498

$ 2,434,131

1,334,211

1,083,268

$(1,332,713)

$1,350,863

Other Total Expenditures Income/(Loss) Ending Fund Balance

Goal (11% of Expenditures) Excess/(Deficit)

* This fund was established effective 2017

Mill and Overlay Projects Status

Street

From

Complete

86th Pkwy (EB only)

Simms St

88th Ave

Complete

86th Pkwy

Alkire St

Simms St

Complete

Kipling St

72nd Ave

80th Ave

Complete

Vance Dr

80th Ave

Pomona Dr

Complete

Everett Wy

84th Ave

Garrison St

Patching Complete - On Hold until 2018

Oak St

80th Ave

76th Dr

Complete

Quail St

76 Dr

80th Ave

Complete

81st Pl

Club Crest Dr

Pomona Dr

Complete

68th Ave

SH 121 (Wadsworth)

Lamar St

Complete

Garrison St

Ridge Rd

51st Ave

Complete

64th Ave

Independence St

Oberon Rd

Complete

Holland Cir

64th Ave

End of Cul-de-sac

Complete

84th Ave

Sheridan Blvd

Gray Ct

Complete

Beech St

72nd Ave

74th Dr

Complete

Alkire St

82nd Ave

86th Pkwy

Complete

58th Ave

Kipling

Simms St

Complete

Independence St

58th Ave

Ridge Rd

Revenue Highlights

• Revenues

consist of a transfer from the General Fund, payments from participants in the 50/50 Sidewalk Replacement program, and street degradation fees • Over one-third of the transfers, nearly $4.2 million, reflect 2017 receipts of the City’s share of state Highway Users Trust Fund (HUTF) revenue

Expenditure Highlights

• Street

maintenance expenditures increased over 63.3% versus 2016

STREET MAINTENANCE FUND

Concrete Replacement Projects Status Street

From

Complete

68th Ave

Saulsbury St

Lamar St

Complete

84th Ave

Sheridan Blvd.

Gray Ct

Complete

Independence St

58th Ave

Ridge Rd

Complete

57th Ave

Independence

Old Wadsworth

Complete

Balsam St

58th Ave

Grandview Ave

Complete

Carr St

57th Ave

Grandview Ave

Complete

84th Ave

Simms St

Newcombe St

Complete

Newcombe St

84th Ave

86th Pkwy

Complete

72nd Dr

Beech St

Devinney Ct

Complete

Devinney Ct

72nd Dr

74th Dr

Complete

74th Dr

Devinney Ct

Alkire St

Complete

62nd Ave

Independence St

Garrison St

Complete

Independence St

Brooks Dr

66th Ave

Complete

Rensselaer Dr

64th Ave

Independence St

Complete

81st Dr

Pomona Dr

Everett St

Complete

81st Ln

Everett St

Club Crest Dr

Complete

Pomona Dr

SH 121 (Wadsworth)

Harlan Ct

Complete

Otis

Lamar Dr

Chase Dr

Complete

85th Ave

Otis Dr

Lamar Dr

Complete

66th Ave

Oak St

Kipling St

Complete

Miller St

64th Ave

66th Ave

Complete

52nd Ave

Wadsworth Blvd

Marshall St

Complete

Sheridan Blvd (west)

67th Ave

69th Ave

Complete

Cody Ct

Grandview

Clarabelle Dr.

Complete

Garland St

Ridge Rd

Garrison St

Complete

63rd Pl

Estes St

Dudley St

Crack Seal Projects Status

Street

From

Complete

Spring Mesa Subdivision

Complete

Village of Five Parks

Complete

Sunrise Ridge Subdivision

Complete

W. 64th Pkwy

SH 93 (Sheridan Blvd.)

Quaker St.

Complete

W. 72nd Ave.

Kipling St.

Pierce St.

Complete

W. 80th Ave

SH 121 (Wadsworth Blvd.)

SH 93 (Sheridan Blvd.)

Complete

W. 58th Ave (Ralston Rd.)

Independence St.

Wadsworth Blvd.

Complete

64th Ave

Ward

Allendale Dr

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. 2017 Budget

2017 Actual

$5,286,000

$4,322,796

$4,380,272

City Cash Transfer

3,258,403

3,286,092

APEX Reimbursement

1,043,347

863,499

218,836

321,303

$8,843,381

$8,851,166

$9,217,396

$8,845,272

$9,217,396

$8,845,272

Parks Fund

Revenue Highlights

• Overall revenue projections are in alignment with the 2017 budget which included a modest increase of $51,832 in revenue compared to 2016

Beginning Fund Balance REVENUES Open Space

Other

Expenditure Highlights

Total Revenues

• Overall expenditures increased 6.5% over 2016 but ended 4.1% under budget • Personnel increased 5.1% with the addition of one new position • A transfer of $117,491 was made to the Vehicles Fund in 2017 for the purchase of additional equipment

EXPENDITURES Ongoing Capital Total Expenditures Income/(Loss) Ending Fund Balance Goal (11% of Expenditures) Excess/(Deficit)

Parks Playground Inspections and Repairs Provided

(374,015)

5,894

$4,911,985

$5,291,894

1,013,914

972,980

$3,898,071

$4,318,914

PARKS FUND

The Majestic View Nature Center provides a fun and educational experience for visitors exploring or participating in one of the public program offerings. The Nature Center has hands-on displays, wildlife exhibits, a kidsâ€™ activity area, classrooms and meeting spaces. Connected is the Majestic View Community Park, with over 80 acres to explore. Visitors can overlook the lake, prairie grasses and wetland areas, take a walk through a demonstration garden, or walk through the interpretive trails. There are opportunities to take great photos of the scenic mountain views or the many wildlife species in the park. Majestic View Nature Center Total Program Participants or Nature Center Visitors Served

Majestic View Nature Center Programs/Sessions (All Types) Provided

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

2017 Budget

2017 Actual

$11,060,000

$ 7,743,576

$ 7,950,058

1,573,940

2,669,539

468,000

538,764

$ 9,785,516

$11,158,361

$10,148,500

$9,319,717

Revenue Highlights

• Sales Tax and Audit Revenue combined exceeded 2017 budget expectations by 2.6% or $206,482. Increased roofing permits due to the May 2017 hail storm and constant building activity pushed Use Tax over its budget by 69.6% • Other revenue tied to agency reimbursements for personnel and overtime increased $196,764, or 29.6%, for 2017

REVENUES Sales Tax/Audit Revenue Use Tax Other Total Revenues

Expenditure Highlights

•

Personnel costs are down 6.8%, or $507,284, for 2017, with ten current vacancies, six Police Officers, three Communication Specialists and one Animal Management Officer. These vacancies include both retirements and resignations. Salaries were down 5.4% and benefits 13.5%. • In 2017, personnel count increased due to the addition of two Police Commanders and four Police Sergeants • Overtime is up 8.3% due to high-profile investigation cases and participation in the Jeffco High-Intensity Drug Task Force (HIDTA)

EXPENDITURES Ongoing Capital Total Expenditures Income/(Loss) Ending Fund Balance Goal (11% of Expenditures) Excess/(Deficit)

1,500,000 $11,648,500 (1,862,984)

$9,319,717 1,838,645

$ 9,197,016

$12,898,645

1,281,335

1,025,169

$7,915,681

$11,873,476

Number of Traffic Accident Investigations Conducted (by Sector)

SPECIAL REVENUE FUNDS

In December 2017 six recruits were hired to start the academy scheduled for January 2018

Number of Emergency Call responses provided (By Sector)

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

2017 Budget

2017 Actual

Beginning Fund Balance

$5,818,000

$ 114,737

$ 420,951

668,003

601,168

City Cash Transfer

45,000

Interest/Other

14,000

47,277

Total Revenues

$ 841,740

$1,114,397

$ 907,406

$ 826,615

415,919

352,857

$1,323,326

$1,179,472

Revenue Highlights

• Revenues increased $122,754 or 12.4% over 2016 • Recovered costs increased $166,944 or 65.7% over 2016

REVENUES Recovered Grants

due to three large repayments

Expenditure Highlights

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

(481,586) $5,336,414

• Essential home repairs increased approximately $147,272 over 2016

• Nineteen

(19) essential home repair projects were completed during 2017 • Approximately $70,000 was transferred to CIP to help fund the Carr Street sidewalk project

(65,076) $5,752,924

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

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 increased approximately $170,240 or 4.2% over 2016 • Grant funding is based upon actual expenditures incurred for the program; 2017 expenditures have increased over 2016 expenditures, which has increased the grant reimbursements

2017 Budget

Arvada Housing Authority Beginning Fund Balance

2017 Actual

31,000

19,178

28,931

REVENUES Recovered Grants

3,910,147

4,203,825

87,418

40,000

Interest/Other

1,000

1,407

Total Revenues

$4,017,743

$4,274,162

$ 417,524

$ 354,185

3,820,997

3,845,593

Transfers

EXPENDITURES

Expenditure Highlights

• Overall

expenditures increased $107,700 or 3.5% over 2016 • Rents in the Denver market continue to increase, causing the growth in Rents Expenditures • The Arvada Housing Authority served 441 families during the fourth quarter 2017 while 484 families were served during fourth quarter 2016 (508 families are allowed)

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

33,241

30,914

$4,271,762

$4,230,692

(254,019) $ (223,019)

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

43,470 $

74,470

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 Beginning Fund Balance

2017 Actual $13,480,000

REVENUES Transfers in

12,874,135

Grants and Recovered Costs

2,676,342

Contributions

1,477,500

Interest Total Revenues

Revenue Highlights

• Transfers consist of a final transfer from the Lands Dedicated Fund for future park projects and a transfer from the General Fund for the Police Delta Station, the Olde Town Hub and several smaller capital projects approved by City Council in April 2017 • Contributions reflect Lands Dedicated payments that are now accounted for in the Capital Improvement Fund • Recovered Costs are reimbursements from other agencies or companies that have shared in the cost of a project

257,470 17,285,447

EXPENDITURES

Expenditure Highlights

CIP Administration

5,459,671

CIP Street Projects

1,289,639

CIP Traffic Projects

2,995,247

CIP Park Projects

3,146,435

CIP Arvada Center Projects

3,341

Total Expenditures

12,894,333

Ending Fund Balance

17,871,114

Anticipated Grant Revenue

7,089,726

Assigned for Projects: CIP Administration

11,213,276

CIP Street Projects

7,605,671

CIP Traffic Projects

1,778,220

CIP Parks Projects

2,634,947

Reserve

1,031,547

Total Assigned for Projects Ending Fund Balance

• The City invested almost $13 million in infrastructure improvements • Administration expenditures are due to the intergovernmental agreement with APEX for the Fitzmorris Recreation Center and the Olde Town Lighting projects • Street expenditures are related to the final payments for W. 56th Avenue, design of Ralston Road reconstruction and the intersections of 64th and 72nd Avenues and Indiana • Traffic expenditures are related to payments for laying fiber and conduit to connect City locations and final payments for the traffic signal reconstruction project and quiet zones • Parks expenditures are primarily due to the Stenger irrigation replacement, Meadowglen Lake, Van Bibber Creek Trail and design services for the Holistic Health and Fitness Park

In association with the 2017-2018 biennial budget 2017-2026 10-year Financial Plan, develop a cost-effective plan to provide City services into the

and

24,263,661

northwest area including development and staffing

697,179

Police Community Station and satellite facilities deemed necessary for other City services. of a new

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

CAPITAL IMPROVEMENTS PROJECTS FUND Project Updates In September 2016, the City issued Certificates of Participation (COP) to finance two projects and in 2017 the City started several new projects. This section updates the status of these projects. West Woods Golf Clubhouse (COP Project): This project fulfills one of City Council’s strategic results that states, “By 2019, West Woods Golf Clubhouse and related facilities are replaced.” West Woods is expected to open by the end of March 2018, nearly a full year prior to the stated result. The clubhouse is now approximately 20,000 square feet and includes a full-sized kitchen, tournament deck and other amenities. Although this project was financed through the issuance of COPs, golf course revenues will be used to pay its share of the COPs. Indiana and West 72nd Avenue (COP Project): This project is one of the top ten CIP projects recommended by the Citizens Capital Improvement Plan Committee (CCIPC) in their report to City Council in June 2015. Indiana Street will be widened to include two thru lanes, double left-turn lanes and dedicated right-turn lanes in each direction. West 72nd Avenue will be widened to include two thru lanes, single left-turn lanes and dedicated right-turn lanes in each direction. The final design is complete and right-of-way acquisition has started. Construction is anticipated to start in 2nd quarter 2018. Ralston Road Reconstruction – Upham Street to Yukon Street: This project was ranked #1 in the CCIPC report. Right-of-way acquisition was anticipated to begin in October 2017. However, review of historic documents took longer than anticipated, so right-of-way acquisition will start at the end of 1st quarter 2018. Fitzmorris Recreation Center: This project is a joint effort between the City of Arvada, Apex Parks and Recreation District and Jefferson County School District R-1. The recreation center will have a six-lane pool, a small weight room and a community/aerobics area. The project is currently underway and is expected to open early summer 2018. Arvada Holistic Health and Fitness Park: This is joint project between the City of Arvada and Red Rocks Community College. The master plan is finalized and the preliminary development plan and final development plan processes will start early 2nd quarter 2018.

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.

Water Fund Beginning Fund Balance

• Revenues from Water Charges were up 0.6% for the year versus 2016, with consumption down 0.6% • Total Tap Fee sales were down roughly $5 million versus last year, which was primarily due to the sale of a tap for a major multifamily development in 2016 • Sales of water for construction purposes represented the bulk of the Other Revenues surplus

$ 95,242,000

$ 20,070,273

$ 21,293,031

10,290,493

10,316,990

Interest

476,000

773,814

1,367,301

1,776,833

$ 32,204,067

$ 34,160,667

$ 18,271,286

$ 17,877,938

Debt Service

2,261,750

2,245,704

Major Capital Maintenance

5,680,363

3,018,889

Other Total Revenues EXPENDITURES Ongoing

Capital

• Personnel expenditures were up a miniscule 0.1% versus 2016 • A vast majority of the Capital Expenditures were related to the

$ 95,242,000

Tap Fees

Total Expenditures

Expenditure Highlights

2017 Actual

REVENUES Water Charges

Revenue Highlights

2017 Budget

Income/(Loss) Ending Fund Balance Goal (25% of Expenditures) Excess/(Deficit)

11,925,663

4,446,255

$ 38,139,061

$ 27,588,786

(5,934,994)

6,571,881

$ 89,307,006

$101,813,881

9,534,765

6,897,197

$ 79,772,241

$ 94,916,685

expansion of Gross Reservoir *$34,106,227 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.

By 2019, water usage by the community is reduced from 146 gallons per day to 139 gallons per day

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

2017 Budget

2017 Actual

$ 9,386,000

$11,825,960

$11,513,805

Tap Fees

918,992

1,214,681

Interest

309,256

267,684

Other

866,693

847,444

$13,920,901

$13,843,615

$ 8,897,606

Ongoing

5,184,500

5,071,009

Major Capital Maintenance

2,951,538

1,559,009

Capital

1,319,500

418,919

$18,353,144

$15,946,543

REVENUES Sewer Charges

Total Revenues EXPENDITURES Metro District

Total Expenditures Income/(Loss) Ending Fund Balance

(4,432,243) $ 4,953,757

$ 7,283,072

4,588,286

3,986,636

365,471

$ 3,296,436

Goal (25% of Expenditures) Excess/(Deficit)

(2,102,928)

Revenue Highlights

• Total Tap Fee sales were substantially down versus last year, which was primarily due to the sale of a tap for a major multifamily development in 2016 • Despite this, 2017 tap sales were the second highest annual sales in history

Expenditure Highlights

• Treatment charges from the Metro Wastewater Reclamation District continue to represent a majority of total Expenditures • Two million dollars of the total Ongoing Expenditures reflects a loan from the Wastewater Fund to the Golf Fund for the replacement of the West Woods Irrigation System • Substantial annual savings in Major Capital Maintenance was due to the timing of main replacement work, with all of the remaining budget to be carried over into 2018

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

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 2017 • Much of the surplus Other Revenues were recovered costs in the form of reimbursements from Jefferson Center Metro District related to City payments to Church Ditch Water Authority

Stormwater Fund

2017 Budget

2017 Actual

Beginning Fund Balance

$7,030,000

$3,352,511

$3,450,144

63,609

139,147

$3,416,120

$3,589,290

$2,737,829

$2,105,867

860,612

860,469

1,210,254

182,637

$4,808,695

$3,148,974

REVENUES Stormwater Fee Other Total Revenues EXPENDITURES

Expenditure Highlights

• Roughly all of the budget remaining for Ongoing Expenditures were related to unspent miscellaneous drainage project funding • All Capital Expenditures were related to pond dredging and improvements at Davis Lane Park

Ongoing Debt Service Capital Total Expenditures Income/(Loss)

(1,392,575)

Ending Fund Balance

$5,637,425

Goal (25% of Expenditures) Excess/(Deficit)

$7,470,317

1,202,174

787,243

$4,435,251

$6,683,073

Annually at least 25% of all City-owned stormwater system assets will be inspected, and cleaned as needed.

440,317

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. 2017 Budget

Golf Fund Beginning Fund Balance

122,000

Revenue Highlights

2017 Actual $

• Overall revenues were down 27.8% compared to 2016.

122,000

This is due to the West Woods clubhouse remodel and the irrigation project. West Woods Restaurant was closed in April for the year and the West Woods golf course operated as an 18-hole course for the entire year. • Total rounds played at West Woods were down 25.0% due to the irrigation project closing down 9 holes at a time, customer inconvenience of construction and loss of amenities. • Lake Arbor total rounds increased 5.5% from 2016. The largest market was in tournaments with a 63.1% growth from 2016, with 432 rounds.

REVENUES Golf Courses

$ 3,608,054

$ 2,567,980

Restaurants

910,744

730,566

10,381,767

9,953,839

236,311

$15,136,876

$13,488,696

Golf Courses

$ 2,262,233

$ 2,146,924

Restaurants

961,087

961,429

1,376,240

944,374

Construction Revenue City Cash Transfer Total Revenues EXPENDITURES

Administration Capital Total Expenditures

10,786,135

9,094,571

$15,385,694

$13,147,298

Income/(Loss)

$ (248,818)

341,398

Ending Fund Balance

$ (126,818)

463,398

Goal (11% of Expenditures) Excess/(Deficit)

1,692,426

1,446,203

$(1,819,245)

$ (982,805)

By 2019, West Woods club house and related facilities are replaced. Master Plan/Financial Feasibility Study Master Plan/Financial Feasibility Study Initiated Design Development Initiated

Expenditure Highlights

• Overall

expenditures were down 15.7% compared to 2016. Reductions in staffing, supplies and inventory costs lead the way. • Capital expenditures represent the construction costs for the new clubhouse and the new irrigation system.

Golf Rounds by Type - January - December Westwoods Player Support

2017

2016

Variance

24,588

33,825

(9,237)

(27%)

Super Users Annuals

5,946

6,311

(365)

(6%)

Super Users Clubs

2,284

2,542

(258)

(10%)

Tournament

3,530

5,226

(1,696)

(32%)

Secure Project Funding

Grow the Game

Final Project Plans Completed, Construction Manager and General Contractor Selected, Construction Contract Awarded by City Council and Temporary Clubhouse Facilities Opened

Total

Construction of Expanded Clubhouse

174

762

(588)

(77%)

36,522

48,666

(12,144)

(25%)

2017

2016

Player Support

23,617

22,526

1,091

Super Users Annuals

14,381

13,465

916

Super Users Clubs

1,332

1,731

(399)

(23%)

Tournament

1,117

685

432

63%

550

447

103

23%

40,997

38,854

2,143

Lake Arbor

Grow the Game Total

Variance

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)

2017 Budget

2017 Actual

Beginning Fund Balance

$ 676,000

REVENUES Concession Services Banquet and Guest Services Total Revenues

26,663

28,084

1,553,675

1,441,748

$1,580,338

$1,469,831

$ 414,624

$ 386,624

1,170,242

1,127,923

EXPENDITURES Administration Operations Capital

Total Expenditures

$1,584,866

Income/(Loss)

$1,514,547

(4,528)

Ending Fund Balance Goal (11% of Expenditures) Excess/(Deficit)

(44,716)

$ 671,472

$ 631,284

174,335

166,600

$ 497,137

$ 464,684

Revenue Highlights

• Arvada Hospitality Sales Revenues per Market Segment Education 4.32%

Government 4.09%

Fraternal 21.59%

In-house City 8.64%

Corporate 19.77%

Religious 13.64% Association 14.09%

Arvada Center 0.91%

Golf Tournaments 5.68%

Center Ballroom improvements contributed to the successful attraction of new clients – Pitten Foundation, Cloud Security Alliance, Cloud Foundation, Dr. Susan Anderson Chapter Association, and St. Louis Catholic Church • Overall revenue is down 6.6% or $103,950 from estimated projections. Concession revenue was up 5.1%, Sales revenue was down 1.2% and Banquet and Guest Services revenues were down 17.7% from budgeted projections.

Social 6.36%

Expenditure Highlights

Wedding/ Anniversary 1%

• Personnel costs were down 2.7% or $24,261 • Non-personnel expenditures were down 7.6% or $46,000 • Contract Services increased 57.1% or $43,656 • Inventory and Equipment decreased 31.6% or $85,800

ENTERPRISE FUNDS

Events by Market Segment January - December ARVADA CENTER Arvada Center

2017

2016

Variance

(5)

(56%)

Association

(15)

(20%)

Corporate

102

(15)

(15%)

Education

36%

Fraternal

Government

29%

In-house

(17)

(33%)

Religious

(1)

(2%)

Social

(5)

(18%)

(4)

(50%)

405

456

(51)

(11%)

Wedding/Anniversary Total WEST WOODS

2017

2016

Variance

Association

(1)

(50%)

Corporate

(8)

(100%)

Education

(2)

(100%)

Fraternal

(2)

(100%)

In-house City

(13)

(81%)

Religious

(1)

(100%)

Social

(13)

(87%)

(16)

(53%)

(3)

(100%)

(59)

(75%)

Golf Tournaments Wedding/Anniversary Total LAKE ARBOR

2017

2016

Variance

Corporate

(1)

(100%)

In-house City

(1)

(50%)

Social

200%

Golf Tournaments

Total

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.

Insurance Fund Beginning Fund Balance

• Contribution revenue increased approximately $368,086 or 17.5% over 2016 • Recovered costs have increased due to reimbursements for vehicle and property damage

Expenditure Highlights

• Overall expenditures increased $187,061 or 15.0% over

2017 Actual

$2,705,000

$2,085,006

$2,108,372

60,000

39,494

86,907

$2,145,006

$2,234,772

$2,747,685

$2,564,663

REVENUES Contributions Interest Other Total Revenues

Revenue Highlights

2017 Budget

EXPENDITURES Risk Management Administration Risk Management Operations

482,941

398,967

Total Expenditures

$3,230,626

$2,963,630

Income/(Loss)

(1,085,620)

Ending Fund Balance *

$1,619,380

(728,858) $1,976,142

*Per GASB Statement 10, an additional $1,416,074 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 2016. This number will be revised as part of the 2017 audit.

2016 • Workers Compensation claims are the bulk of the increase due to several large claims and the settlement of a multi-year claim • Risk management operations was down due to the vacancy of one position • Vehicle and building repairs due to the May 8, 2017 hail storm will not be made until 2018

1:10 Ratio of workers comp claims to employee

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

2017 Budget

Beginning Fund Balance

$7,242,000

2017 Actual $7,242,000

• Maintenance revenue for 2017 is appropriately aligned with

REVENUES Maintenance Replacement

$1,194,934

$1,196,134

1,081,507

1,111,765

$2,276,441

$2,307,898

Maintenance

$1,208,751

$862,799

Replacement

2,414,283

1,395,180

30,779

147,374

$3,653,813

$2,405,353

Total Revenues

Revenue Highlights

the existing identified schedules. With the rollout of several anticipated replacement systems, replacement revenue exceeded budget by 9.6% or $103,394.

EXPENDITURES

Other Total Expenditures Income/(Loss) Ending Fund Balance

(1,377,372) $5,864,628

(97,455) $7,144,545

Number of Business System Updates Completed

Expenditure Highlights

• 11.5 miles of conduit were installed. • Successfully completed the infrastructure upgrade for enterprise data storage and computing needs. The hyper-converged system continues to enable IT operations at a fraction of the cost of traditional and public cloud solutions by combining the City’s IT infrastructure and advanced data services into a single, integrated all-flash solution. • Reporting Workbench and the Enterprise Content Management systems were implemented • Work continued on upgrading the Public Safety radio system

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

2017 Budget

2017 Actual

$208,000

$340,901

$201,260

141,724

159,162

$482,625

$360,422

$379,060

$245,405

70,259

73,874

23,034

$449,319

$342,313

33,306

18,109

$241,306

$226,109

REVENUES Print Shop Copiers Total Revenues

Revenue Highlights

• Print Services revenue is down 4.7% compared to 2016 • Copier revenue is up 1.6% from 2016 • Copier services program supports the print services program

EXPENDITURES

Print Shop Copiers Equipment Total Expenditures Income/(Loss) Ending Fund Balance

Print Impressions Completed (Move to CMO Jan 2017)

Expenditure Highlights

• Ongoing expenditures are slightly higher in 2017 due to an increase in salaries, benefits and supplies expenditures are higher in 2017 due to the purchase of a large banner printer in 2017

• Equipment

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.

2017 Budget

2017 Actual

$3,875,000

Maintenance Contributions

$2,322,230

$2,320,351

Replacement Contributions

1,531,460

1,529,356

200,000

642,540

$4,053,690

$4,492,248

Maintenance

$2,513,677

$2,438,752

Replacement

1,775,123

1,479,623

$4,288,800

$3,918,375

Vehicles Fund Beginning Fund Balance REVENUES

Revenue Highlights

• Other Revenues include recovered costs from auctioning retired vehicles and equipment, as well as transfers from participating funds for the acquisition of new units to the City’s fleet

Expenditure Highlights

Other Total Revenues EXPENDITURES

Total Expenditures

• The drop in Replacement Expenditures is due to the timing of when new vehicles and equipment are received. Utilities will be carrying over the whole of its remaining 2017 budget to pay for some units ordered in 2017, but not received until 2018.

Income/(Loss)

(235,110)

Ending Fund Balance

$3,639,890

573,873 $4,448,873

90% of Fleet Urgent Emergency Repairs will be Completed within 8 hours of Notification

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

2017 Budget

2017 Actual

$3,200,000

$ 514,025

$ 415,325

33,000

40,692

$ 547,025

$ 456,017

$1,348,464

$ 346,908

167,000

$1,515,464

$ 513,908

REVENUES Replacement Transfers Other Total Revenues

Revenue Highlights

• The drop in Replacement Transfers reflects the loss of contributions from the Arvada Center

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

(968,439) $2,231,562

(57,890)

Expenditure Highlights

• Transfers Expenditures represent transfers to the Golf Fund for parking lot and HVAC replacements integrated into the West Woods Clubhouse replacement • The majority of Replacement Expenditures for 2017 involved parking lot paving and flooring work at various City facilities

$3,142,110

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.

Revenue Highlights Operations

2017 Budget

2017 Actual

$267,000

Revenues

790,703

760,316

Expenditures

787,763

756,274

$269,940

$271,042

Beginning Fund Balance

Ending Fund Balance

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

Expenditure Highlights

• Expenditures in 2017 are 3.9% below budget due to savings in the categories of advertising, postage, printing and training

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.

ARVADA ECONOMIC DEVELOPMENT ASSOCIATION (AEDA)

Program

12/31/2017

Beginning Cash Balance Revenues

5,439

Revenue Highlights

• Revenues consist of interest revenue • No City contribution was made in 2017

282,308

Expenditures Ending Cash Balance

$ 604,918

Reserved for Economic Impact Fund

$(300,000)

Reserved for Arvada Manufacturing Initiative

(20,300)

Reserved for Targeted and Professional Services

(5,902)

Commitments

(103,121)

Available Unallocated Cash Balance

$ 175,595

Number of Retention Visits Conducted

Expenditure Highlights

• 26 small business grants were paid in 2017 • Grants help businesses improve signage, landscaping, facades and site improvements • Commitments represent 8 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 subject to rating and concentration limits. 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 12/31/17

Par Value as of 12/31/16

Difference

$ 4,522,793

32,043,949

4,907,906

Corporate

23,992,000

US Agency

94,750,000

US Treasury

9,000,000

$169,216,648

$ 2,000,000

Corporate

7,450,000

US Agency

5,500,000

US Treasury

34,275,000

$ 49,225,000

CITY-MANAGED PORTFOLIO MM/Savings/Cash LGIP Time CD

Subtotal - City

Treasury rates continue to rise with the two-year yield reaching its highest level since the Great Recession. The Federal Open Market committee (FOMC) raised the interest rates three times in 2017, bringing the target rate range to 1.25 – 1.50% in December. The forecast calls for an additional three rate hikes in 2018. The U. S. economy continues the trend of a steady expansion with the average growth of 2.3% over the last four quarters. The positive growth was driven primarily by strong consumer spending and improving business investment. The labor market was characterized by the low unemployment rate of 4.1% and the modest wage growth. Inflation remained below the Federal Reserve’s target of 2%.

PFM-MANAGED PORTFOLIO Negotiable CD

Subtotal - PFM

CONSOLIDATED PORTFOLIO MM/Savings/Cash

$ 4,522,793

$ 3,538,542

32,043,949

29,591,167

2,452,782

Time CD

4,907,906

14,994,523

(10,086,617)

Negotiable CD

2,000,000

Corporate

31,442,000

26,662,000

4,780,000

US Agency

100,250,000

77,250,000

23,000,000

US Treasury

43,275,000

38,580,000

4,695,000

$218,441,648

$190,616,232

$ 27,825,416

LGIP

The City’s investment portfolio has increased by almost $28 million from the 2016 level. The allocation of $218 million is diversified among all available City investment instruments. A significant portion is allocated to U. S. Agencies and Treasuries to achieve the safety and liquidity goals. Bank CD rates have not been able to keep up with the rate increases making that sector unattractive for the time being. Agency yields have continued the trend of spread narrowing. However, new-issue Agencies offered a relative value compared to the secondary market offerings. Selected corporates added a risk-adjusted yield benefit to the City’s portfolio as well. The maturity distribution graph shows a well-diversified allocation of securities between all maturity ranges with a heavier emphasis on 1-3 year range.

Total - Combined

CONSOLIDATED PORTFOLIO ALLOCATION Negotiable CD 0.9%

30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

Time CD 2.2% LGIP 14.7%

984,251

CONSOLIDATED MATURITY DISTRIBUTION US Agency 45.9%

Corporate 14.4%

US Treasury 19.8%

MM/Savings/Cash 2.1%

22.0%

25.1%

17.2%

15.7% 11.4%

8.5%

0-.25

.25-1

1-2

2-3

Maturity (years) 30

3-4

4-5

CITY OF ARVADA INVESTMENT REPORT In 2017 the City’s portfolio saw a year-to-date yield of 1.29% and total interest income of $2.6 million. The increase of 28 basis points (bps) from the 2016 yearto-date yield brought in an additional $804,865 in interest earnings. The average portfolio duration in 2017 has been just under two years. Keeping the duration shorter will allow the City to take advantage of the re-investment opportunities at higher rates as the current securities mature. PFM Asset Management (PFM) is the City’s investment advisor who has managed a portion of the City’s investments since October of 2016. The average yearto-date yield on the PFM-managed portfolio was 1.29%. When interest rates increase fast, the value of the current bonds goes down. This translates into an unrealized loss in the consolidated portfolio, which is to be expected. The safety of the City’s investments is our first priority. Over 90% of the investments in the portfolio are rated AAA or AA+ by the Standard & Poor’s credit rating agency.

PORTFOLIO PERFORMANCE

PORTFOLIO CHARACTERISTICS

12/31/2017

12/31/2016

Difference

City Interest Earnings

$2,051,099

Duration to Maturity (yrs)

PFM Interest Earnings

576,444

Yield to Maturity at Cost

1.564%

1.380%

Total Interest Earned

$2,627,543

$1,822,678

$804,865

Yield to Maturity at Market

1.945%

1.990%

YTD City Portfolio Yield

1.29%

1.01%

+28 bps

YTD PFM Portfolio Yield

1.29%

YTD Benchmark

1.43%

0.91%

+52 bps

City

PFM 1.98

2.42

CREDIT QUALITY (S&P RATING) AA+ 72.7%

ACCOUNT SUMMARY City

PFM

Total

Par Value

$172,552,515

$49,295,000

$221,847,515

Book Value

169,401,519

49,613,777

219,015,296

Market Value

168,124,042

48,902,738

217,026,780

Unrealized Gain /(Loss)

$(1,277,477)

$(711,040)

$(1,988,517)

AAA 18.7%

A-1 1.0%

A-1+ 0.5%

AA6.2%

AA 0.9%

Investment Management Focus - 2017 Jerome Powell, the newly appointed Chair of the Federal Reserve is expected to continue Yellen’s gradual approach towards monetary tightening. The FOMC forecasts three interest rate hikes for 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 rate 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 to subject the City’s portfolio to excessive turnover if interest rates fall.

Rick Assmus