1 IOWA MUNICIPAL MANAGEMENT INSTITUTE Program The Economic Outlook and Iowa Cities March 17, 2011 Laurie Mardis, CFA

2 Slow Economic Growth Will Continue  The outlook for 2011 growth has improved given the extension and expansion of tax cuts as well as quantitative easing.  Unemployment remains high and further declines will be key to future growth.  Inflation is not an immediate concern, although higher oil prices and uncontrolled Chinese growth could impact U.S. consumers.

3 Slow Economic Growth Will Continue The recovery continues to be tepid as growth lags past recoveries. Rising ISM Indices suggest the business side of the economy is strong.

4 Barclays Capital Slow Economic Growth Will Continue Employment is key to recovery, and the unemployment rate remains stubbornly high compared to past recoveries. The holiday shopping season was relatively strong but consumer spending lags previous recoveries.

5 Slow Economic Growth Will Continue A $10/bbl rise in oil prices roughly translates into an additional 25 cents per gallon of gas. This increase in consumer energy costs reduces GDP growth by 0.20%. The recent increase in oil prices is not yet damaging, but should supply disruptions spread to Iran or Saudi Arabia the repercussions to global growth could be significant.

6 Iowa Cities Continue to Face Budget Issues  Tax revenue has declined  Expense pressures are increasing, particularly with respect to employee benefits  Investment income has provided little cushion

7 The Federal Reserve is unlikely to raise rates until Money Market Rate Environment Remains Depressed

8 The Federal Reserve’s easy monetary policy encourages investors to take risk by investing longer. The Yield Curve is Historically Steep

9 Iowa Code Section 12B.10: Government Securities – obligations of the U.S. Government, its agencies and instrumentalities Certificates of Deposit and other evidences of deposit – issued by Iowa banks in same or contiguous counties Repurchase Agreements – agreement to sell and subsequently repurchase collateral Bankers Acceptances – issued by Iowa banks in same or contiguous counties Commercial Paper – short term, unsecured note issued by a corporation Money Market Funds – must be SEC registered fund that complies with 2a-7 guidelines Joint Investment Trust – organized under Iowa Code Section 28-E How Can Iowa Cities Invest in this Environment?

10 Know Your Short Term Investments There are many investment options in the market, but not all money market funds are the same. Public funds entities must invest in money market funds that are: Registered with the SEC and operated in accordance with SEC Rule 2a-7, or A joint investment trust organized under Iowa Code Section 28E

11 Organized in 1987 under Iowa Code Section 28-E, registered with the SEC Sponsored by the League of Iowa Cities, the Iowa State Association of Counties, and the Iowa Association of Municipal Utilities Over 400 participants in the program Provides daily liquid investments within the guidelines of SEC Rule 2a-7, investing in accordance with the Investment Policy of the Trust Authorized investments: Government securities Iowa bank CDs and deposit accounts, CDARs Repurchase agreements backed by government securities Iowa Public Agency Investment Trust (IPAIT)

12 Program Highlights: Offers daily liquidity through the Diversified Portfolio and longer term investments through the Fixed Term Automated (FTA) program Allows unlimited number of individual accounts with no minimum balances required Offers Flexible Withdrawal CD (Flex CD) for the investment of bond proceeds during the construction phase of a building project IPASonline: Unique, internet-based proprietary reporting system that allows real-time account inquiry and transaction capabilities. Participants can invest or withdraw funds, check balances, and view transaction history with this service. Iowa Public Agency Investment Trust (IPAIT)

13 Pass the IPAIT resolution Visit to get new account forms and current rateswww.IPAIT.org Contact Adam Corrie (public funds marketer) for more information: , How to Participate in IPAIT