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Annual ReportFinancial data for calendar year 2014
oregon.gov/treasury
2014 Oregon State Treasury State Treasurer Ted Wheeler
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Oregon State Treasury 2014 Annual Report
WEBwww.oregon.gov/treasury
[email protected]
PHONEmain : 503-378-4000capitol / media inquiries:
503-378-4329
ADDRESSESLabor & Industries Building350 Winter Street NE,
Suite 100Salem, Oregon 97301
State Capitol900 Court Street NE, Room 159Salem, Oregon
97301
Investment Division6650 SW Redwood Lane, Suite 190 Tigard, OR
97224
OREGON 529 COLLLEGE SAVINGS
[email protected]
Contact
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4 MESSAGE FROM TREASURER WHEELER About the Treasurer
7 ABOUT THE TREASURY Agency Snapshot Funds Under Management Bond
Ratings Selected Boards and Commissions Past Treasurers
11 INVESTMENT DIVISION Oregon Public Employees Retirement Fund
Market Value Other Key Fund Balances OPERF Investments by Asset
Class Portfolio Size OPERF Investment Allocation Summary
17 OREGON INVESTMENT COUNCIL Year-End Investment Strategy
18 DEBT MANAGEMENT DIVISION Comparison of Long-Term Debt
22 FINANCE DIVISION Treasury Banking Transactions Short-Term
Fund Clients Public Funds Collateralization Program
26 OREGON 529 COLLEGE SAVINGS PLAN Fourth Quarter 2013 Network
Statistics
Oregon State Treasury 2014 Annual ReportContents
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Oregon State Treasury 2014 Annual Report
Dear Oregonians:
When families pointed their wagons westward along the Oregon
Trail toward a promise of prosperity, they knew the trek would
require vigilance. Navigating for long distances means keeping an
eye on the horizon, being prepared, and making well-informed course
corrections when necessary.
The same logic applies when keeping Oregons financial status
strong. Im pleased to report that your State Treasury is looking
ahead and modernizing in a new financial era, and made significant
strides in 2014 to help make Oregon and Oregonians more financially
secure, both now and in the long-term. An approach that is
vigilant, deliberate and forward-thinking is serving all Oregonians
well.
Oregons wise management of public funds helped Oregons public
portfolio reach a record level of assets under management. The
Oregon Public Employees Retirement Fund, State Accident Insurance
Fund, Common School Fund each achieved new record levels in 2014.
In addition, due to the sustained low interest rate environment and
Oregons strong credit rating, we were able to continue our
successful campaign of refinancing public debt to save millions.
Local governments benefited from our efficient banking opera-tion
and solid performance of the Oregon Short term Fund and the Local
Government Investment Pool.
Other highlights for 2014 include:
Incorporating evaluation of Environmental, Social and Governance
risk factors in our investment process, reflecting a new reality in
capital markets;
Launching the Cash Management Improvement and Renewal Program to
prepare for the challenges of banking for Oregon governments in the
21st century;
Protecting Oregons healthy credit rating and maintaining our
commitment to the prudent use of debt;
Making low-cost financing available to community nonprofits
through the Oregon Facilities Authority;
Taking a strong stance as a responsible investor by interfacing
with public companies and proxy votes, and calling for better
diversity on corporate boards of directors;
Submitting a blueprint to the Legislature to modernize
investment operations, improve risk mitigation and save millions of
dollars of fees on behalf of beneficiaries of public trust funds.
We were not able to convince legislators to enact the reforms;
Proposing a new dedicated trust fund for higher education to
alleviate the student debt crisis. Voters balked at the proposed
new use of general obligation debt;
Highlighting the potential to make profitable investments in the
new renewable economy that would benefit Oregon trust funds;
Performing a financial feasibility analysis for the proposed
Columbia River Crossing project to ensure a project of this
magnitude meets high standards of financial certainty for
Oregonians; and
Achieving new records for both enrollees and assets invested in
the Oregon College Savings Plan, while also increasing investment
options and lowering costs.
Every Oregonian benefits from the success of the State Treasury,
because every dime saved in costs and every dime gained in
investment returns translates to savings for you. Vigilance and
attention to the horizon is paying off.
It is a privilege to be your State Treasurer and I am pleased to
offer this annual report to outline how your Treasury works daily
to make Oregon more financially secure. Thank you for taking the
time to learn more.
Greetings
Ted Wheeler
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Ted Wheeler About the Treasurer
A sixth-generation Oregonian, Ted Wheeler cares deeply about
Oregon and the states financial health. He is committed to
protecting the states current strong credit ratings, to ensuring
that public investments remain both prudent and profitable, and to
conservatively managing Oregons debt. He believes all Oregonians
will be able to stand taller because their state is on a stable
financial footing.
Since being appointed and then elected in 2010, he directed
efforts to implement money-saving technologies, strengthened access
to data, authorized fraud lawsuits against firms that misled
investors, earned an upgrade in Oregons credit rating, and revamped
the Oregon 529 College Savings Network with lower costs and more
options for families.
Wheeler also has assumed a leadership role in economic
develop-ment. He convened business leaders and spearheaded a new
state-wide blueprint, dubbed the Oregon Investment Act, and it was
ap-proved by the Legislature in 2012.
Serving as the Chair of the Multnomah County Commission from
2006 to 2010, Wheeler was a champion of preventive services. Under
his leadership, Multnomah County reduced the cost of government
while maintaining safety net programs for the elderly, drug and
alcohol treatment programs, and forging partnerships to fund a
Mental Health Crisis Center. As the countys chief executive, he
oversaw a workforce of more than 4,400 and was responsible for
reducing and balancing the budget and also cutting the countys
debt.
Treasurer
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Ted Wheeler About the Treasurer
Wheeler brings a strong management and financial background to
the office of State Treasurer. Before entering elected office, he
worked in the financial services industry, and his career included
posts at financial institutions including Bank of America and
Copper Mountain Trust, where he was a senior manager.
He earned his undergraduate degree in Economics from Stanford
University, an MBA from Columbia University, and a Masters in
Public Policy from the John F. Kennedy School of Government at
Harvard University.
Wheeler was born in Portland, and graduated from Lincoln High
School. His family has deep Oregon roots. The town of Wheeler,
located on Nehalem Bay on the Oregon coast, is named after his
great-grandfather.
Wheeler is a longtime community volunteer leader, and has
devoted energy to diverse organizations including Neighborhood
House, Portland Mountain Rescue, and the Oregon Sports Authority.
He is an Eagle Scout.
When he is not working, Wheeler enjoys endurance sports, and
suc-cessfully summited Mt Everest in 2002. He snow-shoed to the
North Pole with his wife and twice completed the Ironman Triathlon
in Kona, Hawaii.
He lives in Southwest Portland with his wife and daughter.
Treasurer
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AGENCY SNAPSHOT
5,028
Oregon State Treasury About the Treasury
92$46.7 m1,057
PositionsBiennial Budget (2013-15)
Short Term Fund Depositors
FUNDS UNDER MANAGEMENT
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
$66.90
$75.20
All funds, as of Dec. 31 (in $ billions)
$81.30
$60.30
$68.40
$73.50
$72.50
$79.10
$87.50
$89.54
The State Treasury is Oregons professional financial services
center. The office provides a menu of investment, bonding and
banking services to serve citizens, businesses, public retirees,
Oregons sovereign tribes, and local governments, including schools,
cities and counties. It administers the states public debt and
central banking for government agencies, and protects public fund
deposits.
Treasury is responsible for the investment management of public
trust funds including the Oregon Public Employees Retirement Fund,
which is the largest fund in the states portfolio. Treasury invests
the PERS fund for the highest risk adjusted returns, following the
guidance of the Oregon Investment Council.
Treasury does not oversee the benefits and administration of
PERS. That responsibility falls to the Public Employees Retirement
System, a separate agency.
Treasury also does not collect taxes (that is a function of the
Oregon Department of Revenue), nor does it oversee the drafting of
the state budget, which is guided by the Legislative Fiscal Office
and Department of Administrative Services.
All of the functions of the State Treasury are designed to serve
clients and the public, and those systems are constantly
re-evaluated to ensure that services are rendered in an efficient
and cost-effective way.
The State Treasury does not receive appropriations from the
state General Fund. The entire agency budget is derived from
payments for the low-cost services it provides.
The agency is divided into five business units, and each of
those works to fulfill the mission of providing financial
stewardship for Oregon -- while also providing high levels of
customer service and information transparency. The divisions are
responsible for investments, debt management, finance, information
technology and the Oregon 529 College Savings Network.
Treasury serves individual Oregonians and families by helping
them save for higher education and job training, and by promoting
financial education, outreach efforts and the Reading is an
Investment Program.
Treasury
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In addition, the State Treasurers office provides indirect
benefits to Oregonians by generating investment income for Oregon,
and by protecting bank accounts belonging to schools and other
public institutions.
Treasury is the states central bank for government, and all
state agencies are Treasury customers. They receive cash management
and debt management services, including check redemption,
electron-ic banking, deposits, and bonding assistance.
Oregon local government agencies and tribes can invest in the
Oregon Short Term Fund, via the Local Government Investment Pool.
Because of the Treasury-administered public funds collateralization
program, local governments can deposit funds in local financial
institutions. That program protects public deposits from the risk
of bank and credit union failures.
Treasury helps secure low-cost financing for community projects
built by nonprofits and makes capital available to Oregon local
banks, which then can lend more money in communities.
Small and large businesses benefit because Treasury oversees
targeted efforts to invest in Oregon, including making more money
available to lend through the timed CD program. Administration of
the Oregon Growth Account was shifted to Business Oregon, the
states economic development agency, at the end of 2013.
Darren Bond Deputy Treasurer
Tom Rinehart Chief-of-Staff
Scott Harra Chief AdministativeOfficer
Kristin Stewart Human ResourcesManager
Oregon State Treasury About the Treasury
Bond Ratings
AA+AA+Aa1$2.68b$1.1b
S&PFitch
MoodysGF-supported debt
Lottery supported debt
Treasury is responsible for bond sales, for interacting with
credit ratingfirms, and for staffing the State DebtPolicy Advisory
Commission.
Treasury
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Oregon State Treasury Selected Boards and Commissions
Sets policy for 529 College Savings Network. Members: Jennifer
Cooperman, Chair; Peter Angstadt; Darren Bond, Deputy State
Treasurer and Treasurers Designee; Paul Kelly; and, Larry Large.
Meets four times annually. ORS 348.849.
Sets policy for investment of Oregon State Treasury-managed
trust funds, including the Oregon PublicEmployees Retirement Fund
and the State Accident Insurance Fund. Richard B. Solomon,
Chair;Katherine J. Durant, Vice-Chair; Keith Larson; Rukaiyah
Adams; Ted Wheeler, Oregon State Treasurer;and Paul Cleary, PERS
Director. ORS 293.706.
Provides technical assistance to local governments and state
agencies to improve the market for bond issues in Oregon. Members:
Carol McCoog, Chair; Doug Middlestetter; Laura Lockwood-McCall,
Treasurers Designee; Javier Fernandez; Paul Matthews; Laurie
Steele; and, Nancy Brewer. Meets two to four times annually. ORS
287A.630.
Recommends prioritization and coordination of certain Oregon
economic development resources. Members: Gerry Langeler, Co-Chair;
Patricia L. Moss, Co-Chair; Jim Coonan; Monica Enand; Adam
Zimmerman; Ted Wheeler, Oregon State Treasurer; Sean Robbins; Rep.
Tobias Read; Sen. Bill Hansell; and Beth Cook, Executive Director.
Staffed by Business Oregon starting in 2014.
Oversees public infrastructure assistance, and industrial land
certification. Members: Gary D. Neal, Board Chair; Erik J.
Andersson; Patrick Clancy; Niki J. Iverson; Mark Knudson; Don W.
Skundrick; Rep. Caddy McKeown; Sen. Richard Devlin; and, Laura
Lockwood-McCall, Treasurers Appointment. Staffed by Business
Oregon.
Advises the Oregon Investment Council and the Oregon State
Treasury Investment staff in the management of the Oregon Short
Term Fund. Members: Douglas E. Goe, Chair; Darren Bond, Treasurers
designee; Deanne Woodring; Pat Clancy; Laurie Steele; Michael
Schofield. ORS 294.885
Oregon 529 College Savings Board
Oregon Investment Council
Oregon Municipal Debt Advisory Commission
Oregon Growth Board
Oregon Infrastructure Finance Authority
Oregon Short Term Fund Board:
Treasury
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Oregon State Treasury Past Treasurers
1 John D Boon (D) March 3-1859 - Sept. 8, 18622 Edwin N. Cooke
(R) Sept. 8, 1862 - Sept. 12, 18703 L. Fleischner (D) Sept. 12,
1870 - Sept. 14, 18744 A. H. Brown (D) Sept. 14, 1874 - Sept. 9,
18785 Edward Hirsch (R) Sept. 9, 1878 - Jan. 10, 18876 G. W. Webb
(D) Jan. 10, 1887 - Jan. 12, 18917 Phil Metschan (R) Jan. 12, 1891
- Jan. 9, 18998 Charles S. Moore (R) Jan. 9, 1899 - Jan. 14, 19079
George A. Steel (R) Jan. 15, 1907 - Jan. 3, 191110 Thomas B. Kay
(R) Jan. 4, 1911 - Jan. 6, 191911 O. P. Hoff (R) Jan. 6, 1919 -
March 18, 192412 Jefferson Myers (D) March 18, 1924 - Jan. 4,
192513 Thomas B. Kay (R) Jan. 4, 1925 - April 29, 193114 Rufus C.
Holman (R) May 1, 1931 - Dec. 27, 1938
15 Walter E. Pearson (D) Dec. 27, 1938 - Jan. 6, 194116 Leslie
M. Scott (R) Jan. 6, 1941 - Jan. 3, 194917 Walter J. Pearson (D)
Jan. 3, 1949 - Jan. 5, 195318 Sig Unander (R) Jan. 5, 1953 - Dec.
31, 195919 Howard C. Belton (R) Jan. 4, 1960 - Jan. 4, 196520
Robert W. Straub (D) Jan. 4, 1965 - Jan. 1, 197321 James A. Redden
(D) Jan. 1, 1973 - Jan. 3, 197722 H. Clay Myers, Jr. (R) Jan. 3,
1977 - April 1, 198423 Bill Rutherford (R) April 1, 1984 - July 9,
198724 Tony Meeker (R) July 9, 1987 - Jan. 4, 199325 Jim Hill (D)
Jan. 4, 1993 - Jan. 1, 200126 Randall Edwards (D) Jan. 1, 2001 -
Jan. 4, 200927 Ben Westlund (D) Jan. 5, 2009 - March 7, 201028 Ted
Wheeler (D) March 9, 2010 - present
Treasury
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John Skjervem Chief InvestmentOfficer
Michael Mueller Deputy ChiefInvestment Officer
Investment Division About the Investment Division
On behalf of all Oregonians, the Investment Division of the
Oregon State Treasury (OST) manages a large and complex investment
portfolio. This portfolio is designed to generate investment
returns which help fund many important State objectives including
retirement security for public sector employees, academic support
for Oregon schoolchildren and compensation claims for injured state
workers. In aggregate, the Investment Division oversees a financial
and real asset portfolio that exceeded $89.5 billion as of December
31, 2014, and included the $70.0 billion Oregon Public Employees
Retirement Fund (OPERF).
Consistent with institutional investment standards, the OPERF
portfolio is broadly and deliberately diversified across several
asset classes and multiple developed and emerging market
geographies. Moreover, OPERF investment strategies have
historically produced good results: average, annualized net returns
for the 3-, 5- and 10-year periods ended December 31, 2014 were
12.3%, 10.3% and 7.4%, respectively. According to state actuaries,
this consistently positive investment performance has reduced
taxpayers share of retiree benefit payments.
OPERF assets are allocated among the following five, strategic
investment categories: public equity; private equity; real estate;
fixed income; and other alternative and opportunistic investments.
Return expectations and target allocations for each of these five
categories are developed between staff and external consultants;
moreover, return forecasts contemplate a 20-year investment
horizon. Importantly, equity-oriented investments represent OPERFs
largest capital allocation. While improving the likelihood of
generating an adequate, long-term return, this equity-biased
approach also produces higher levels of short-term portfolio
volatility.
OREGON Public EMPLOYEES RETIREMENT FUND MARKET VALUE
2009
2010
2011
2012
2013
2014
$52.44
$56.68
As of Dec. 31 (in $ billions).
$55.48
$61.05
$67.91
$70.03
Treasury
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Investment Division About the Investment Division
For example, in bull market conditions (e.g., 2013), OPERFs
equity-oriented portfolio will likely generate strong investment
results, but during periods of market duress and/or outright asset
price declines (e.g., 2008), OPERFs investment performance will not
meet long-term expectations and may even register negative returns.
Accordingly, the Investment Division has broadly diversified OPERFs
portfolio in an attempt to mitigate short-term asset price
volatility and protect against a sharp and/or protracted downturn
in any single market, geography or asset category.
As measured by the Russell 3000 index, the U.S. stock market
generated solid returns last calendar year (CY2014), advancing
12.6% over the 12-month period ended December 31, 2014. With a net
return of 9.9%, OPERFs U.S. public equity portfolio lagged due to
its emphasis on small capitalization stocks, a proxy for which
(namely, the Russell 2000 index) registered a much lower 4.9%
return in CY2014. However, all domestic stocks compared favorably
to foreign equities as most international and emerging market
indices recorded negative results last year. OPERF managers
investing abroad produced a collective loss of 2.9% in CY2014,
ahead of the 3.9% decline in the MSCI ACWI Ex-US IMI Net index,
OPERFs non-U.S. public equity benchmark.
With an estimated value of $14.7 billion, OPERFs private equity
investments represented 21.0% of total OPERF assets at December 31,
2014, and generated a net return of 15.9% in CY2014. This result
fell far short of the private equity portfolios 21.2% benchmark
return, but average annual returns over the previous 10-year period
remain favorable at 13.8% vs. 12.1% for this same benchmark, the
Russell 3000 (lagged one quarter) plus 300 basis points.
$12.4$4.59$1.43 $89.5
Oregon Short Term Fund State Accident Insurance Fund
Common School FundTotal Invested Portfolio
Other key Fund Balances
All funds, as of Dec. 31 (in $ billions)
Treasury
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Investment Division About the Investment Division
OPERF investments by asset class
In Billions PartAlternatives 0.8708 1.30%Public Equity 28.025
41.80%Private Equity 14.287 21.30%Opportunity 0.8283 1.20%Fixed
Income 15.338 22.90%Real Estate 7.473 11.10%
Total 100%
1 2 3 4 5 6
$ 1.36$ 27.7$14.7$ 1.05$16.4$ 7.73
AlternativesPublic Equity
Private EquityOpportunity
Fixed IncomeReal Estate
All funds, as of Dec. 31 (in $ billions)
In real estate, OPERF capital is allocated across four property
or security types: core; value-add; opportunistic; and
publicly-traded real estate investment trusts (i.e., REITs). In
CY2014, OPERFs real estate investments generated a 14.2% net
return, almost 3% better than the 11.3% return on OPERFs real
estate benchmark, the NCREIF index, lagged one quarter. At
year-end, these real estate investments were valued at $7.7
billion, and represented 11.1% of total OPERF assets. For the
ten-year period ended December 31, 2014, OPERFs real estate
portfolio delivered a 9.1% net average annual return, beating the
8.6% average annual return calculated for the lagged NCREIF index
during that same period.
Bond markets rebounded strongly last year following tepid
performance in 2013. With a mid-cycle slowdown underway in most
international and emerging economies, deflation replaced inflation
as traders perceived primary threat to global economic activity
last year. Investments in fixed income securities comprised 21.2%
of total OPERF assets and contributed a net 3.5% return in 2014,
slightly better than the 3.0% return recorded by OPERFs custom
fixed income benchmark.
Finally, OPERF investments in alternative assets and
opportunistic strategies contributed mixed results in CY2014, an
expected outcome given the highly heterogeneous nature of these two
categories which include, among other things, investments in
minerals and mining, timber, agriculture, infrastructure and hedge
funds. At December 31, 2014, these alternative asset and
opportunistic strategies comprised a modest 3.4% of OPERFs total
portfolio; however, the Investment Division plans to significantly
expand OPERFs allocation to these categories given their attractive
return and diversification attributes
Treasury
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Investment Division About the Investment Division
Also prominent among the Investment Divisions responsibilities
is its daily management of the $14.4 billion Oregon Short Term Fund
which provides a highly liquid, short-term investment repository to
support the cash flow needs of many state agencies and local
governments. In addition, division staff evaluate and monitor
investment options within the Oregon Savings Growth Plan, a Section
457 defined contribution plan available through voluntary
participation to all public sector employees in Oregon.
Other investment accounts for which the Investment Division and
OIC have responsibility include the $4.6 billion State Accident
Insurance Fund, $1.4 billion Common School Fund and $45.1 million
Higher Education Pooled Endowment Fund. With long-term investment
horizons similar to OPERF, and often eligible for the same
investment managers and strategies, these other accounts also
recorded satisfactory, annualized returns for the 1-, 3-, 5-, 7-
and 10-year periods ended December 31, 2014.
Treasury
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PORTFOLIO SIZE (MARKET VALUE IN MILLIONS)
12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 12/31/09
Public Employees Retirement Fund (OPERF) $70,025.1 $67,913.3
$61,055.5 $55,487.2 $56,681.3 $52,440.4
Oregon Short Term Fund (OSTF)1 12,439.5 12,717.8 11,327.7
10,785.2 10,618.3 10,197.1
State Accident Insurance Fund (SAIF) 4,589.9 4,416.7 4,420.3
4,164.4 4,121.1 3,948.6
Common School Fund (CSF) 1,433.7 1,362.2 1,178.8 1,071.8 1,107.9
1,006.4
Oregon War Vet Bond Sinking Fund 99.1 94.2 81.2 85.6 100.7
114.4
DCBS Fund 205.2 183.5 180.0 187.6 204.3 244.9
DAS Funds 148.3 163.0 129.3 158.9 120.9 112.7
Higher Education Endowment Fund 45.1 75.8 66.8 61.0 63.6
61.2
Other Funds 552.3 568.5 605.7 538.5 451.7 298.9
TOTAL $89,538.2 $87,495.0 $79,045.3 $72,540.2 $73,469.8
$68,424.6
Investment Division 2014 Annual ReportTreasury
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OPERF INVESTMENT ALLOCATION SUMMARY OIC Target Actual Market
Value Allocations % (Thousands)
Total Cash 0-3 % 0.4 % $ 265,442Total Fixed Income Securities
15-25 23.7 16,426,468Total Real Estate 9.5-15.5 11.2
7,727,004Public Equities 32.5-42.5 40.0 27,715,061Private Equities
16-24 21.2 14,709,784Total Equities 52.5-62.5 61.2
42,424,845Alternative Investments 0-10 2.0 1,363,285Opportunity
Portfolio 0-3 1.5 1,049,655
Total OPERF Regular Account 100 100 69,256,699Total Variable
Fund N/A N/A 768,414
Total OPERF 100 % $ 70,025,113
Note: Includes impact of cash overlay program.
Investment Division 2014 Annual ReportTreasury
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Oregon Investment Council About the Investment Council
The Oregon Investment Council (OIC) is a six-member board
responsible for setting the investment policy and direction for
Oregon public trust funds and assets. Four members are appointed by
the governor. The State Treasurer serves by position. The director
of PERS, a separate agency, is a non-voting member.
The OIC ensures that money in the funds is invested and
reinvested as productively as possible. The investments are managed
as a prudent investor would do, and this standard requires the
exercise of reasonable care, skill, and caution -- and is applied
to investments not in isolation, but as part of an overall
investment strategy.
Under the OICs open-door policy, investment officers consider
proposals and solicitations from any firm or partnership that
submits a proposal in good faith. This policy, however, does not
bind the OIC to in invest in any proposal. No placement agents are
needed to do business with Oregon.
Importantly, neither the OIC nor OST staff have any oversight
responsibility for the determination of public employees retirement
benefits or the level of OPERF contributions collected from state
and local agencies.
OPERF PERFORMANCE
Keith Larson Chairman
Richard Solomon Vice-Chairman
Katherine J. DurantVice-Chair
Rukaiyah Adams Ted Wheeler State Treasurer
Paul Cleary PERS Director/nonvoting
ACTUAL7.3%
12.3%10.3%
5.2%7.4%
1 Year3 Year5 Year7 Year
10 Year
BENCHMARK8.2%
13.4%10.4%
5.5%7.3%
Treasury
(OPERF Regular Account, average annual returns)
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Laura Lockwood-McCall Division Director
Larry Groth Deputy DivisionDirector
Oregons credit ratings are a barometer of the states fiscal
health. Managing the states debt capacity in a prudent way helps to
bolster credit scores, while also ensuring Oregon can get the most
mileage for todays jobs and tomorrows opportunities.
Public bonding is an important tool that can enhance Oregons
quality of life and jump-start the economy by constructing and
modernizing roads, schools, and vital public facilities that will
make the state a better place in the future. Yet debt must be used
wisely.
The Debt Management Division is the States hub for bond finance:
It approves the issuance of all bonds and appropriation credits for
state agencies. In addition, it is the clearinghouse for bond data,
bond calendars, and information about credit ratings.
The division provides technical support to local governments,
offers training on selected debt-related topics, and created an
online manual to help government officials plan and execute
successful bond sales. The list of upcoming state bond sales can be
found at bondtracker.us/bondcalendar.
As of June 30, 2014, Oregons outstanding net tax-supported debt
was $7.8 billion. Credit rating firms have applauded Oregons
careful attention to debt and budget discipline, and the states
credit ratings remain steady and solid.
The division reviews the structure of each bond sale,
coordinates the timing of state agency bond sales, secures credit
ratings, negotiates and accepts bids for bond placement, reviews
transcripts and other documents, provides for the delivery of
bonds, and assists with settlement of bond issues.
The division reviews the financial and economic disclosure
information provided for the sale of State of Oregon general
obligation (GO) bonds, revenue bonds and appropriation credits.
Staff advise agencies about market developments and make debt
policy and legislation recommendations to the State Treasurer.
Debt Management Division About the Debt Management
DivisionTreasury
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Treasury Debt Management Division About the Debt Management
Division
Treasury manages debt carefully to ensure Oregonians get the
most for their dollars now and in the future. Too much borrowing
can jeopardize the states credit rating, and the State Debt
Advisory Commission, which is chaired by the State Treasurer,
advises the Legislature on prudent debt limits. The Commission
provides an annual report to the governor and legislators.
The Municipal Debt Advisory Committee maintains a debt profile
of all local government units in Oregon that issue bonds, and has a
mission to improve the market for Oregon bonds and to assist local
governments in selling bonds.
In 2014, it provided 191 free overlapping debt reports, which
determine a taxing districts overall debt burden, based on its own
debt as well as any shared obligations with overlapping
governments.
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State of Oregon Comparison of Long-Term Debt Outstanding as of
6/30/2014
General Obligation Bonds General Fund Supported Debt
Net Tax- Supported Debt
Total Gross Debt Outstanding
General Fund SupportedCommunity College Bonds $ $116,095,000 $
$116,095,000 $ $116,095,000 Higher Education Facility (XI-G) Bonds
376,121,059 376,121,059 376,121,059 Pollution Control Bonds (42% of
Total) 16,230,900 16,230,900 16,230,900 Alternate Energy Bonds
(XI-J) (33% of Total) 78,685,686 78,685,686 78,685,686 DAS Oregon
Opportunity Bonds 119,115,000 119,115,000 119,115,000 Seismic Rehab
- Public Education Bldgs (XI-M) 17,000,000 17,000,000 17,000,000
Seismic Rehab - Emergency Service Bldgs (XI-N) 10,045,000
10,045,000 10,045,000 State General Purpose (XI-Q) Bonds (85% of
Total) 770,061,750 770,061,750 770,061,750 DAS Pension Obligation
Bonds (32% of Total)* 606,142,400 606,142,400 606,142,400
Total General Fund Supported $ $2,109,496,795 $ $2,109,496,795 $
$2,109,496,795
Self-SupportingVeterans' Welfare Bonds - - 274,165,000 Higher
Education Facility (XI-F) Bonds - - 1,250,835,796 Pollution Control
Bonds (58% of Total) - - 22,414,100 Water Resources Bonds - - -
Elderly & Disabled Housing Bonds - - 118,545,000 Alternate
Energy Project Bonds (67% of Total) - - 161,429,314 State General
Purpose (XI-Q) Bonds (15% of Total)DAS Pension Obligation Bonds
(68% of Total)*
- 135,893,250 1,288,052,600
135,893,250 $3,251,335,060
Total Self-Supporting $ $1,423,945,850 $ $3,251,335,060
Total General Obligation $ $2,109,496,795 $
$3,533,442,645 $ $5,360,831,855
Debt Management Division 2014 Annual ReportTreasury
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21
Debt Management Division 2014 Annual Report
State of Oregon Comparison of Long-Term Debt Outstanding as of
6/30/2014
Revenue Bonds General Fund Supported Debt
Net Tax- Supported Debt
Total Gross Debt Outstanding
Direct Revenue BondsLottery Revenue Bond Program(s)** -
1,136,300,000 1,136,300,000 Highway User Tax Revenue Bonds -
2,437,965,000 2,437,965,000 Single-Family & Multi-Family
Housing - - 1,049,115,000 Economic Development - Bond Bank - -
94,095,000
Total Direct Revenue Bonds $ - $ 3,574,265,000 $
$4,717,475,000
Conduit or Pass Through Revenue BondsEconomic & Industrial
Development - - 336,768,790 Oregon Facilities Authority - -
1,876,817,001 Multi-Family Housing Programs - - 201,041,419
Total Conduit or Pass Through Revenue Bonds $ - $ - $
$2,414,627,210
Appropriation CreditsCertificates of Participation (COPs)
574,217,500 675,550,000 675,550,000 Oregon Appropriation Bonds - -
-
Total Appropriation Credits $ $574,217,500 $ $675,550,000 $
$675,550,000
Total Gross Debt $ $13,168,484,065 Total Debt - Less Conduit
Revenue Bonds $ $2,683,714,295 $ 7,783,257,645 $
$10,753,856,855
(1) To conform to rating agency methodologies Pension Obligation
Bonds are considered net tax-supported debt.
(2) Rating agencies recognize that these programs are supported
by a dedicated Lottery revenue source.
Treasury
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22
Cora Parker Finance Division Director
Finance Division About the Finance Division
The Finance Division provides cash management and investment
operational support services to all state agencies and hundreds of
Oregon local government entities, including cities, counties,
schools, and special districts.
The division managed more than 14.3 million financial
transactions in 2014 - including cash deposits, electronic fund
transfers, and check issuances. Those transactions totaled just
over $210 billion for the calendar year.
Through its Cash Management Program, the division develops
strategies and takes actions to administer and invest the cash of
Oregon state agencies and local governments.
Treasury procures and administers the States banking contracts
and manages day-to-day operational issues including reconciliation
of commercial bank and agency activity, provision of statements to
agencies detailing account activity, and calculation and payment of
interest to accounts authorized by statute to retain interest
earnings.
The program includes four primary areas of cash management
activity for state agencies: Short-and intermediate-term investment
of cash, central banking operations, cash management improvement
activities, and information infrastructure and security
activities.
Through Cash Management Improvement Activities, Treasury works
to address agencies needs for more cost-effective and efficient
transaction processing -- such as automated clearing house
transactions, wires, merchant bankcard transactions -- and delivery
of services via methods such as electronic commerce readiness,
prepaid card programs, lockbox services, and remote deposit.
The division also administers the Public Funds Collateralization
Program under ORS Chapter 295, to protect public funds de posited
in private-sector financial institutions. Collateral is needed to
cover deposits at banks and credit unions that ex ceed the levels
insured by the Federal Deposit Insurance Corporation (FDIC) and the
National Credit Union Administration (NCUA). As of Dec. 31, 2014,
there were 31 banks and 11 credit unions holding public funds, and
the collateral pledged to protect those funds was more than $1.8
billion.
MILLIONS OF TREASURYBANKING TRANSACTIONS
2006
2007
2008
2009
2010
2011
2012
2013
2014
11.6
14.1
(All funds, as of Dec. 31 by calendar year)
14.5
19.6
18.5
18.3
15.2
15.4
Michael Auman Deputy Division Director
Treasury
14.3
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23
Finance Division About the Finance Division
The Oregon Short Term Fund and Local Government Investment Pool
provide a secure place for Oregon governments to make short-term
investments until money is needed to cover expenses. For most
Oregon government entities, the lions share of revenue arrives once
a year. Yet bills come due year-round. The primary investment
objectives for the fund are preservation of capital, then
liquidity, then achieving yield.The Oregon Short Term Fund includes
990 Local Government Investment Poll participants and 81 agencies
as of December 31, 2014.
Oregon agencies use Treasuryfor banking services includingthe
Oregon Short Term Fund,which is where the generalfund is deposited.
Local governments have the option touse the OSTF, so
customersatisfaction and competitiverates are important
factors.
Short-term fund clients
AGENCIES8890838382828181828281
20042005200520072008200920102011201220132014
LOCAL GOVernment9699639779891,0111,0121,007991987986990
Treasury
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Finance Division 2014 Annual Report
Public Funds Collateralization Program Uninsured Public Funds
Deposits by BankQuarter Ending - December 2014
Aggregate Oregon Uninsured Public Funds Deposits :
$2,331,186,159.76
Aggregate Oregon Public Funds Collateral Pledged:
$1,822,597,139.52
Note for required disclosures: The Custodian, Federal Home Loan
Bank of Seattle, is the agent of the depository bank. The
securities pledged are designated as subject to the Pledge
Agreement between the Depository Bank, Custodian Bank and Office of
the State Treasurer (OST) and are held for the benefit of OST on
behalf of the public depositors.
Albina Community Bank 11,169,000.00 AmericanWest Bank
25,463,804.00Baker Boyer Bank 1,149,691.00 Bank of America
146,675,428.80Bank of Eastern Oregon 21,958,677.00 Bank of the
Cascades 113,961,154.03Bank of the Pacific 105,396.58 Bank of the
West 22,088,715.00Banner Bank 18,954,474.00 Capital Pacific Bank
6,758,216.82Citizens Bank 5,836,853.00 Clackamas County Bank
603,140.00Clatsop Community Bank 4,731,818.00 Columbia Community
Bank 4,731,818.00Columbia State Bank 107,904,302.93 Community Bank
3,303,689.00First Federal Savings and Loan 390,707.90 Home Street
Bank 0.00JPMorgan Chase Bank 0.00 Keybank 70,981,481.00 MBank
360,365.42 MUFG Union Bank 936,939.00Oregon Coast Bank
21,691,932.00 Oregon Pacific Bank 6,354,326.00Pacific Continental
Bank 47,359,125.73 Peoples Bank of Commerce 1,002,271.00Premier
Community Bank 949,543.00 Riverview Community Bank 0.00 Siuslaw
Bank 15,737,044.00 The Commerce Bank of Oregon 23.49US Bank
657,635,970.92 Umpqua Bank 667,824,901.00Washington Federal
21,506,495.14 Washington Trust Bank 0.00Wells Fargo Bank
318,305,060.00 Willamette Community Bank 9,485,614.00
Treasury
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Finance Division 2014 Annual Report
Public Funds Collateralization Program Quarterly Uninsured
Public Funds Deposits by Credit Unions
Aggregate Oregon Uninsured Public Funds Deposits:
$45,614,437.55Aggregate Oregon Public Funds Collateral Pledged: $
71,324,856.07
Note for required disclosures: The Custodian, Federal Home Loan
Bank of Seattle, is the agent of the depository. The securities
pledged aredesignated as subject to the Pledge Agreement between
the Depository, Custodian Bank and Office of the StateTreasurer
(OST) and are held for the benefit of OST on behalf of the public
depositors.
Advantis Credit Union 12,566,627.68 Quarterly December
2014Cascade Central Credit Union 816,869.00 Quarterly December
2014Marion and Polk Schools Credit Union - Quarterly December
2014Northwest Community Credit Union 16,511,781.00 Quarterly
December 2014Old West Federal Credit Union - Quarterly December
2014OnPoint Community Credit Union 3,059,240.82 Quarterly December
2014Oregon Community Credit Union 7,031,483.00 Quarterly December
2014OSU Federal Credit Union 2,751,646.95 Quarterly December
2014Pacific Crest Federal Credit Union 1,015,601.00 Quarterly
December 2014Rogue Federal Credit Union 30,799.00 Quarterly
December 2014St Helens Community Federal Credit Union 595,814.00
Quarterly December 2014Unitus Community Credit Union 1,003,703.15
Quarterly December 2014Wauna Federal Credit Union 230,871.95
Quarterly December 2014
DepositoryUninsured Public Funds Deposits Report Type Quarter
Ending
Treasury
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The Oregon 529 College Savings Network was created to increase
the ability of Oregonians to save for future higher education
expenses. With its unique investment options and easy enrollment
process, it is helping connect more students and families with the
dream of a college education and post-secondary vocational
training. In addition, it provides state and federal tax advantages
and more flexibility than many other college savings vehicles.
Oregon currently offers two 529 plans: the Oregon College
Savings Plan, which is the states flagship plan sold directly to
investors, and the MFS 529 Savings Plan, sold exclusively through
financial advisors. Each plan is comprised of a specific set of
investment options, and each has its own unique features that offer
participants a variety of choices and contribution options.
Benefits of Oregons 529 plans
Annual Oregon state tax deduction on contributions of up to
$4,530 for tax year 2014..
All earnings and withdrawals are free from state and federal
taxes if used for qualified college expenses.
Control of the funds remains with the person who establishes the
account.
Funds can be used nationwide at any eligible school of higher
education, including technical, vocational and graduate school.
Funds can be used for tuition, room and board, books, and other
required fees.
Investment options range from aggressive to principal
protected.
Low fees.
Accounts can be opened for as little as $15 per month.
Beneficiaries can be changed without penalty or tax
consequences.
Assets are protected from bankruptcy and held in trust by the
State of Oregon.
Oregon 529 College Savings Plan About the Oregon 529 College
Savings Network
Michael Parker Executive Director
Treasury
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27
Network Statistics as of Dec. 31, 2014
Total Accounts Unique 80,064 74,604 154,668
Owner/Beneficiary
Total Accounts In-State/ 70,845 / 9,219 36,773 / 37,831 107,618
/ 47,050Out-of State
Total Unique Beneficiaries 76,539 73,425 149,964
Total Unique Beneficiaries 64,683 / 11,856 35,938 / 37,487
100,621 / 49,343In State/Out of State Assets Invested - In-State
$1,020,113,476 $419,416,326 $1,439,529,802 - Out-of-state
$137,701,409 $698,599,166 $836,300,575 Total Assets $1,157,814,885
$1,118,015,492 $2,275,830,377
Oregon College MFS 529 Savings Plan Network TotalSavings
Plan
Oregon 529 College Savings Plan 2014 Annual ReportTreasury
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oregon.gov/treasury
2014 Oregon State Treasury
