Initiatives of the Ohio Treasurer of State JD Pisula, Deputy - PowerPoint PPT Presentation

Initiatives of the Ohio Treasurer of State JD Pisula, Deputy Director of Investments Jon Azoff, Director of Debt Management Lizz Lewis, Director of Legislative Affairs

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Ohio Market Access Program Credit enhancement program for Ohio local governments Helps municipal issuers lower borrowing costs Leverages the state’s credit rating (SP -1+) State agrees to purchase a participating note at maturity if municipality cannot retire the note For note issuances up to 1yr in maturity and up to $3MM in par amount • Larger par amounts to be considered on case-by-case basis • Both General Obligation and revenue-backed notes are eligible 3

Ohio Market Access Program Highlighted Transactions Unenhanced Annual Maturity Issuer Par Type Yld at Issue Est Yld % Savings Savings 6/13/2016 City of Hamilton $103,695,000.00 Revenue 0.43% 0.65% 33.85% $228,129.00 7/21/2016 Reading Community City School District $14,972,300.00 GO 0.45% 0.85% 47.06% $59,889.20 7/21/2016 Reading Community City School District $9,800,000.00 GO 0.45% 0.85% 47.06% $39,200.00 9/16/2016 Village of North Randall $2,308,500.00 GO 0.55% 8.00% 93.13% $171,983.25 9/22/2016 Village of Oakwood $2,621,500.00 GO 0.45% 0.90% 50.00% $11,796.75 10/6/2016 Madison Local School District $1,455,000.00 GO 0.55% 1.00% 45.00% $6,547.50 11/17/2016 City of Bowling Green (AMP) $2,235,000.00 Revenue 0.45% 1.00% 55.00% $12,292.50 11/22/2016 Village of Silverton $1,900,000.00 GO 1.25% 1.90% 34.21% $12,350.00 1/25/2017 Village of Timberlake $450,000.00 GO 0.70% 2.50% 72.00% $8,100.00 2/9/2017 Blendon Township $5,280,000.00 GO 0.70% 0.85% 17.65% $7,920.00 3/30/2017 Maple Heights City School District $2,211,000.00 GO 0.75% 1.10% 31.82% $7,738.50 4/7/2017 Village of Versailles (AMP) $840,000.00 Revenue 0.80% 1.25% 36.00% $3,780.00 4/28/2017 Village of Monroeville (AMP) $1,700,000.00 Revenue 0.75% 1.50% 50.00% $12,750.00 5/2/2017 Village of Holiday City (AMP) $3,000,000.00 Revenue 0.75% 1.50% 50.00% $22,500.00 6/21/2017 City of Garfield Heights $2,500,000.00 GO 0.80% 1.55% 48.39% $18,750.00 6/22/2017 Village of Newton Falls (AMP) $1,845,000.00 Revenue 0.80% 1.50% 46.67% $12,915.00 6/22/2017 City of Kirtland $2,000,000.00 GO 0.85% 1.15% 26.09% $6,000.00 7/5/2017 City of Uhrichsville $7,670,000.00 GO 0.90% 1.50% 40.00% $46,020.00 4

Ohio Market Access Program Awarded the 2014 Small Issuer Deal of the Year by The Bond Buyer Village of Oakwood in Cuyahoga County issued 1-yr GO notes at 0.35% and saved over $10,000 in annual interest expense 5

Visit www.tos.ohio.gov/OMAP for more information. 6

Ohio Bond Bank Legislation What is a bond bank? Current legislation (HB 435) How it could work with OMAP 7

July 25, 2016 State Treasurer of Ohio Ohio Pooled Collateral System (OPCS) Lizz Lewis, Director of Legislative & Policy Affairs 8

Bank Collateral • Changes in the State budget bill: • Lien perfection now required • Ohio Pooled Collateral System implemented by July 1, 2017 • H.B. 374 created the option for rule based collateral in Ohio 9

Ohio Pooled Collateral System Section I: Overview 10

OPCS • The Ohio Pooled Collateral System (OPCS) allows for participating Financial Institutions (FI) to pool collateral for Ohio Public Entities’ deposits . • The Treasurer of State (TOS) is the sole regulator and monitor of the program. • FI’s will chose to 1) participate in the pooling method (OPCS) collateralizing at 102% or 2) not participate in OPCS and collateralize all public entities with specific pledge method at 105%. 11

Monitoring Responsibility • Specific Pledge Method Responsibility for monitoring the FI’s compliance falls solely on the public entity who is required to maintain a record of all securities pledged at all times. • Pooling Method TOS is responsible for monitoring the FI’s collateral levels and compliance. The FI will be required to electronically report to the OPCS. The FI may choose any eligible and approved collateral trustee and pledge a single pool of collateral through OPCS for all of the FI’s uninsured Ohio public entity deposits. 12

OPCS Public Entity Responsibilities • Public Entity are responsible for: • Periodically reviewing and monitoring the reports posted on the OPCS website related to its deposits of public funds. • Verifying the accuracy and completeness of the daily reports of its itemized deposits and reporting discrepancies to the FI directly. • A public entity shall inform its FI of a significant change in the amount or activity of its deposits within a reasonable time before the change occurs. 13

Books & Records • The FI will maintain separate, accurate, and complete records relating to each deposit of Public Entity, each pledge of collateral, and each transaction related to a pledge of collateral. • The Collateral Trustee will maintain separate, accurate and complete records relating to each pledge of collateral and each transaction related to a pledge of collateral. • The FI and Collateral Trustee will provide, upon request, to TOS any additional information or confirmation regarding a deposit of public funds or a pledge of collateral. • A Public Entity may review the records of the FI and TOS related to that Public Entity deposit and collateralization of public funds in OPCS. 14

OPCS Website TOS will maintains the OPCS Website (“Portal”) for use by the FIs, Public Entities, and collateral trustees for the efficient and transparent reporting and monitoring of public deposits and corresponding collateral. • TOS will build and maintain the Portal for the receipt, analysis, and reporting of balance and collateral data will be available to the FI and public entities. • The FI reports the Public Entities deposits daily to the program website. 15

OPCS Website • TOS receives the collateral detail from the collateral trustee and prices the collateral daily. The Treasurer’s Office will approve all substitution and releases of collateral to the Collateral Trustee via the Portal. • TOS compares the total market value of collateral pledged by the FI to the total amount of deposits, plus any accrued interest, in the depository institution’s pool, less the applicable FDIC limits and agreed collateral haircut and reports the information on the Portal daily. • The Public Entity is responsible to periodically review the balance of their itemized deposits reported to ensure that it is accuracy and completeness. The Public Entity can review the FI’s total pooled collateral amounts compared to the pooled deposits amounts on the Portal. The Public Entity will be able to set up daily or periodic automatic email notices to assist with this requirement. 16

Project Timeline 17

Possible System Architecture Collateral Trustee Participating Banks External Services: Indicative Sec Data BAU Collateral Activity Pricing Ratings Trustee 1 Trustee 2 Bank 1 Bank 2 Automated Daily Files Automated Daily Files IDC IDC Bloomberg Bloomberg Manual File Upload TMS TMS Trustee 3 Trustee X Bank 3 Bank X Other Other Manual File Upload Confirmation file & notifications/alerts Confirmation file & notifications/alerts BAU Collateral Processes OPCS Portal Bank Users Bank Processes · FI opt in/opt out Portal Architecture · FI file transmission · Missing FI file · Sufficiency remediation OPCS Web Interface · Release collateral TOS Users · File Landing Pad Substitute collateral · Collateral maturity Trustee Processes Data Warehouse & · Create/remove Trustee account Portal Processes · Trustee file transmission · Missing Trustee file Collateral Public Fund Processes Pricing Public Unit · Review OPCS reporting Data Users · Deposit attestation · Create/remove PU account Automated TOS Processes Server Server · Daily Files Collateral percentage requirement · FDIC calculation · Collateral requirement calculation · Collateral compliance · Collateral reconciliation · Collateral valuation · Collateral sufficiency · Repair record Public Depositors of Participating Banks Print file for APS2 – Collateral Pool(s) Public Unit 1 Public Unit 2 Quantum Analytics – non-active Position/Security Golden Collateral Pool Compliance Public Units Record, Asset Pricing, and Monitoring Reconciliation Processes Public Unit 3 Public Unit X 18

Processes Overview Bank Floor TOS Cushion Monitoring Create Trustee FI Opts In FI Opts Out Trustee Leaves OPCS Account PU Collateral Negotiated Percentage Floor Create/ Repair Deposit Remove PU Collateral Record Attestation FI File Account Requirement Start Transmission Calculation Dashboard & FDIC Collateral Report End Calculation Sufficiency Sufficient? Y Updates DRAFT Sufficiency Release Remediation Collateral N - File submission - Deposit attestation Collateral Sufficiency - Collateralization Valuation Remediation Substitute Collateral sufficiency Collateral Maturity Legend Collateral Trustee File Missing FI Start Reconciliation Automated System Process Transmission File Manual System Process Manual Process Decision Point Process reference Process Flow Sequence Number Collateral Collateral End Compliance Substitution 19

Questions Lizz Lewis Director of Legislative & Policy Affairs Ohio Treasurer Josh Mandel 20