You are on page 1of 37

Q3 2016 Quarterly Earnings Call

Addressing the Widening Gap of


Economic Inequality for Women and
People of Color
Presented by
City Treasurer Kurt Summers

NOVEMBER 28, 2016 | 12:00 PM


BEFORE WE GET STARTED…

AUDIO NEED HELP? QUESTIONS


Participants can hear the If at any time during the call you need Have a question? At any time
call through the computer assistance, please call or e-mail: during the presentation, type
or over the phone; you 312-593-5505 in your question by clicking
don’t have to be on both to or “Q&A” There will be time
hear the presentation. You city.treasurer@cityofchicago.org alotted for Q&A at the end of
do need to be registered the call.
online to view the webcast.
WELCOME & PURPOSE OF CALL

Transparency Outreach & Advocacy


During the Treasurer’s 77 visits to
This is the 7th Quarterly Earnings
Chicago’s 77 neighborhoods,
Call since the Treasurer took office.
It is open to the public, the City residents voiced their need to be
Council and anyone interested in regularly engaged in our outreach and
understanding the state of advocacy efforts. This is an
Chicago’s finances. opportunity to learn about our CTO
initatives and legislation.

Best Practices Action


As the primary investment This Quarterly Earnings Call for
manager for the City of the City of Chicago is only one
Chicago, the Treasurer seeks to step in financial reporting and
be held as accountable as any performance tracking of the City’s
other investment management investment portfolio. The call will
firm is to their investors. This provide an overview of the
call is shaped after some national economy as well as
reporting done by the nation’s Chicago's current fiscal landscape
largest investment managers and balance sheet and outline the
and public companies. economic impact of investing in
our communities.

3
12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

4
NATIONAL ECONOMY

Unemployment (Adj.) GDP (% Change)

Q1 2016 Q2 2016 Q3 2016 (adv.)


Aug 2016 Sept 2016 Oct 2016

4.9% 5% 4.9% 1.1% 1.4% 2.9%

IMF Expected Growth Rates

Previous Updated Previous Updated


2016 Forecast 2016 Forecast 2017 Forecast 2017 Forecast

Global Economy 3.1% 3.1% 3.4% 3.4%

U.S. Economy 2.2% 1.6% 2.5% 2.2%

Advanced Economies 1.8% 1.6% 1.8% 1.8%

Emerging/ Developing
4.1% 4.2% 4.6% 4.6%
Economies

5
Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, International Monetary Fund
12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

6
CHICAGO ECONOMY

Unemployment
Q2 2016 Q3 2016 Q/Q (%)
National 5% 4.9% +0.1%
Chicago 5.4% 5.2% -0.2%

7
Sources: Bureau of Labor Statistics, World Business Chicago
CHICAGO ECONOMY

Chicago Home Sales Chicago Median Home Sale Price


Oct 2015 Oct 2016 YOY (%) Oct 2015 Oct 2016 YOY (%)

Residential 2,173 1,981 -8.8% Residential $240,000 $262,000 9.2%

8
Sources: Illinois Association of Realtors
CHICAGO ECONOMY OVERVIEW

Chicago’s unique characteristics foster the foundation for continued economic growth
across its diversified economic landscape

Among Chicago’s recent successes:

• Growing opportunities
 0.84% YOY increase in private jobs as of September 2016
 1.6% YOY increase in labor force
 1.4% YOY increase in employed residents
 1.6% YOY increase in wages

• Burgeoning innovation
 11.6% YOY increase in number of new patents as of September 2016

• Global Transit Hub


 1.3% YOY increase in number of passengers served by O’Hare and Midway as of September

Source: World Business Chicago, PayScale


9
CHICAGO VC INVESTMENT STATUS

Just under $200 million was invested into Chicago area companies in Q3 2016, comparable to Q3 last year.

10

Source: World Business Chicago


12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

11
CTO INVESTMENTS – 3Q PORTFOLIO OVERVIEW
Portfolio Characteristics
Operations Operations Reserve Bond Proceeds Long-Term Reserves Total
Total Par Value $ 2,100,383,431.12 $ 1,585,918,388.77 $ 2,040,640,494.13 $ 632,782,585.59 $ 6,359,724,899.61
Total Market Value $ 2,103,296,941.44 $ 1,633,677,744.95 $ 2,048,352,633.94 $ 673,532,555.09 $ 6,458,859,875.42

Asset Allocation (Par Value)


Operations Operations Reserve Bond Proceeds Long-Term Reserves Total
Corporate Bonds $ - $ 888,634,000.00 $ 242,660,000.00 $ 425,570,000.00 $ 1,556,864,000.00
Municipal Bonds $ 96,530,000.00 $ 467,685,000.00 $ 364,754,000.00 $ 196,660,000.00 $ 1,125,629,000.00
U.S. Agency Bonds $ 1,029,720,000.00 $ 97,200,000.00 $ 666,180,000.00 $ - $ 1,793,100,000.00
Treasury Notes $ - $ - $ 20,000,000.00 $ - $ 20,000,000.00
Commercial Paper $ 474,074,000.00 $ 9,800,000.00 $ 353,000,000.00 $ - $ 836,874,000.00
Certificates of Deposit $ 150,000,000.00 $ - $ - $ 150,000,000.00
Money Market Funds $ 50,781,186.43 $ 122,599,388.77 $ 394,046,494.13 $ 10,552,585.59 $ 577,979,654.92
Cash $ 299,278,244.69 $ - $ - $ - $ 299,278,244.69
Total $ 2,100,383,431.12 $ 1,585,918,388.77 $ 2,040,640,494.13 $ 632,782,585.59 $ 6,359,724,899.61

12

Chart Source: Chicago City Treasurer’s Office


CTO INVESTMENTS – Q3 PORTFOLIO OVERVIEW (CONTINUED)
Asset Allocation (%)
Operations Operations Reserve Bond Proceeds Long-Term Reserves Total
Corporate Bonds 0.0% 56.0% 11.9% 67.3% 24.5%
Municipal Bonds 4.6% 29.5% 17.9% 31.1% 17.7%
U.S. Agency Bonds 49.0% 6.1% 32.6% 0.0% 28.2%
Treasury Notes 0.0% 0.0% 1.0% 0.0% 0.3%
Commercial Paper 22.6% 0.6% 17.3% 0.0% 13.2%
Certificates of Deposit 7.1% 0.0% 0.0% 0.0% 2.4%
Money Market Funds 2.4% 7.7% 19.3% 1.7% 9.1%
Cash 14.2% 0.0% 0.0% 0.0% 4.7%
Total 100.0% 100.0% 100.0% 100.0% 100.0%

Earnings Summary (3Q YTD)


Operations Operations Reserve Bond Proceeds Long-Term Reserves Total
Realized Gain/Loss $ 1,128,457.41 $ 17,931,215.35 $ 603,511.05 $ 24,451,316.36 $ 44,114,500.17
Interest Income $ 6,683,059.74 $ 22,218,511.79 $ 13,742,189.02 $ 15,197,682.35 $ 57,841,442.90
Amortization $ 2,108,005.10 $ (2,069,629.29) $ 1,962,711.06 $ (696,656.47) $ 1,304,430.40
Total $ 9,919,522.25 $ 38,080,097.85 $ 16,308,411.13 $ 38,952,342.24 $ 103,260,373.47

Chart Source: Chicago City Treasurer’s Office 13


12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

14
THE WIDENING GAP OF ECONOMIC INEQUALITY

Graph Source: U.S. Census Bureau, Current Population Survey, 1968 to 2016 Annual Social and 15
Economic Supplements. U.S Bureau of Labor Statistics.
THE WIDENING GAP OF ECONOMIC INEQUALITY (CONT.)

16
Chart Source: WBEZ, Economic Policy Institute, U.S. Census Bureau.
12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

17
THE CHICAGO URBAN LEAGUE

Entrepreneurship
The Chicago Urban League Entrepreneurship (CUL EC) was founded in 2007
to help African-Americans launch, grow, and sustain businesses. Through
personalized consulting, educational programs, and deal-making assistance,
the CUL EC provides entrepreneurs with the tools and resources to
maximize revenue growth, profitability, job creation, and innovation.

Workforce DevelopmentINFORMATION ON LENDING #s IN


The Chicago Urban League,CHICAGO
throughORit NATIONALLY
Workforce Development
FOR programs,
works to raise African American
WOMENemployment
AND POC COMPARED
and incomeTO levels through job
training and placement services,
WP career exposure, career advancement,
seminars, coaching and long-term retention strategies.

Chart Source: Chicago City Treasurer’s Office 18


GOODCITY INC ’S INVESTCHICAGO

Last month, InvestChicago was launched to mobilize investments to female and


minority entrepreneurs working to solve complex problems in the city we call home.
Investing in these entrepreneurs results in economic growth across our city, catalyzing
a flow of resources into neighborhoods.

At a time when we look to bring prosperity to all 77 Chicago neighborhoods, this


INFORMATION
strategy aims at directly addressing localON LENDING
economic #s IN
development by empowering
CHICAGO
longtime residents to become ORof
agents NATIONALLY FOR neighborhoods.
change in their
WOMEN AND POC COMPARED TO
WP

Chart Source: Chicago City Treasurer’s Office 19


12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

20
NATIONAL INVESTMENT FUND MODELS

Description Impact Focus Funding Governance


Focuses investments on targeted groups: CalPERS invested in Niman Ranch, a natural meat
Seeded with $475 million in
CalPERS low to moderate income geographies, distributor based in Oakland, California. The
2001. In total, CalPERS has
Invests California pension companies owned or managed by $400,000 seeded investment launched a company
invested $1.04 billion in the last
dollars into traditionally minorities, women, or companies that employs 110 workers from low-income
15 years, supporting 164,753
underserved markets. delivering goods to an ethnically diverse backgrounds with wages averaging $14 / hour and
workers across 361 companies.
customer base. annual sales of $50 million.
NYCRS has invested in multiple projects, including:
NYCRS Housing Since the 1980s, NYCRS has
The New York City Retirement Systems home loans to those earning less than 200% of the
Investments invested 2% of portfolio in this
invest in economically targeted area median income, seeding the development of
Pension fund supports fair fund. While projecting a 4-5%
investments (ETIs) in the 5 boroughs, not over 30,000 multi-family and workforce housing
housing policies in NYC return, the 10-year gross returns
limited in geographies. units, and improvements on 38,000 affordable
boroughs. to taxpayers were 6.34%.
housing units.
While the group has been
Jumpstart Cleveland provides funding for CardioInsight, a women and minority owned around since 2004, the
JumpStart, Inc. – small business and economic development business, launched in 2005 to modernize the investments have been most
Cleveland, OH projects in northeastern Ohio. The fund far electrocardiogram (ECG) through an idea launched significant as of late. In 2015, the
Public-private partnership outpaces industry standards for investing in by students at Case Western Reserve University. The $35 million investment yielded
investing in small businesses and minority and women-owned enterprises, $600,000 investment helped the company launch 6,294 jobs, $395 million in labor
development projects. launching a fund specifically for this market and it was bought in June 2015 by Medtronic for income, and an additional $46.8
this year. more than $90 million. million generated in state and
local taxes as a result.
Focused on economic development in
Michigan, this fund makes investments of
InvestMichigan! Seeded in 2008 by Gov.
$2 - $9 million in companies with holdings
Privately-managed fund The fund has brought employment to 3,000 Granholm with $300 million over
of less than $200 million and a direct link to
investing for statewide economic Michigan residents since launched in 2008. the first three years, coming
Michigan’s economy (i.e. headquarters,
development. from state pension funds.
substantial state employment, or planned
expansion in-state).
Table Source: 21
COMPARISON OF LOCAL FUNDS
Description Impact Focus Funding Governance
Projects in 8 selected
neighborhoods.
One-time grants based on developers’
Neighborhood Opportunity Fund Eligible costs are building Allocated by Department of Planning and
payment of downtown density fees.
Uses developer fees to make grants to acquisition / rehabilitation, Development, with projects over
Estimated at $10M annually, with 80%
neighborhood projects. small business training, $250,000 requiring City Council approval.
to neighborhood projects.
public infrastructure costs,
and hiring subsidies.
Private governance by Calvert
Foundations seeded $65 million to this Foundation, MacArthur Foundation, and
Benefit Chicago CDFI, NFPs, and social renewable investment fund. Individual the Chicago Community Trust, with
Investment funding from foundations for enterprises within the six- investors can also privately invest with investments led by MacArthur
eligible nonprofits and social enterprises. county Chicago region. this fund. Benefit Chicago aims to make Foundation. Community advisory
a $100 million commitment overall. committee appointed by all three
foundations.
CIT has distributed $50 million to date.
Funds are leveraged between private
Focused on infrastructure CIT Board is comprised of 7 mayoral
Chicago Infrastructure Trust improvements throughout
and public sources. Private dollars are
appointees, confirmed by the Council.
Social impact bonds to fund infrastructure. repaid in the future based on resulting
City. Currently chaired by Treasurer Summers.
government savings. Funding relies on
private investment.
Currently designated for
pilot in 8 commercial
Proposed grant fund to support small
corridors in specific
Right-to-Thrive Zones businesses in Thrive Zones would pull
neighborhoods. Businesses
Planned tax-free business districts with funds from various districts, including Pending legislation.
launching in these corridors
assistance in permitting and staffing. TIF, planned manufacturing districts, and
would be exempt from
the small business improvement fund.
property, income, and sales
taxes

22
12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

23
CHICAGO COMMUNITY CATALYST FUND (CCCF)

Description Impact Focus Funding Governance

Investment groups selected


Long-term self-sustaining fund. through RFP process overseen by
Low to middle income Seeded with $100M for renewable Board of Directors, chaired by
Chicago Community Catalyst
communities in Chicago’s 77 use in neighborhood investments, Treasurer, with CFO, Planning
Fund
neighborhoods, specifically those with ability to grow fund overtime Commissioner and 4 mayoral
Invests renewable city dollars in
meeting Community Reinvestment as Treasurer’s Office exceeds appointments confirmed by
neighborhood projects.
Act criteria. investment targets and private Council. Advisory Board with 3
investors join. aldermen and 4 community
members.

Chart Source: Chicago City Treasurer’s Office 24


CHICAGO COMMUNITY CATALYST FUND (CCCF) (CONT.)

The Chicago Community Catalyst Fund:

• will be launched with a 3-year, $100 million commitment from the City of Chicago.
 Year 1: $35M
 Year 2: $35M
 Year 3: $30M

• is structured to protect against conflicts of interest. The Fund77 investment board


members will comprised of investment experts.

• The advisory board structure ensures investments are made with local knowledge and
partnership.

• will be subject to stringent oversight by City Council and Chicago’s taxpayers.

• serves a new and distinct function in Chicago’s development ecosystem.

• investments will match the diversity of Chicago.

Chart Source: Chicago City Treasurer’s Office 25


CHICAGO COMMUNITY CATALYST FUND (CCCF) (CONT.)

$
+ Outside $$

Chart Source: Chicago City Treasurer’s Office 26


12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

27
5
2016: INNOVATION & IMPLEMENTATION

DRIVING VALUE THROUGH ACTION TO CHICAGO’S COMMUNITIES

HOME BUYER
ASSISTANCE MD ORDINANCE PREDATORY LENDING
PROGRAM

IMPACT IMPACT IMPACT


A grant program for Amending city code to To create protections for
individuals who are buying a increase transparency for the small businesses from online,
home or refinancing an City’s banking partners alternative lenders.
existing mortgage within the
City of Chicago Passed City Council on
September 14th, 2016

28
Home Buyer Assistance Program
WHO QUALIFIES? Anyone who meets the income and credit score requirements is eligible for
the program. There are two categories of loans available, each with their own
requirements:

FHA, VA, USDA Loans: Regardless of family size, the borrower’s annual
income must be $87,400 or less. As set by FHA, VA, or USDA guidelines,
participants will generally need a minimum credit score of 580 to qualify.

Fannie Mae/Freddie Mac Loans: Regardless of family size, the borrower’s


annual income must be $133,000 or less. As set by Fannie Mae/Freddie Mac
guidelines, participants will generally need a minimum credit score of 640 to
qualify.

DO I NEED TO BE A FIRST-TIME HOME BUYER? No

HOW MUCH GRANT MONEY COULD I RECEIVE? Qualified borrowers may receive a grant for up to 7% of the total loan amount
based on income. For example, for a total loan amount of $250,000, a
borrower could receive a grant of no more than $17,500 to cover down
payment and closing costs.

WILL I BE REQUIRED TO USE MY OWN FUNDS? Qualified borrowers will be required to contribute the lesser of $1,000 or 1%
of home purchase price at the closing.

CAN THIS PROGRAM HELP ME REFINANCE MY HOME? Yes, as long as there is no cash back to the borrower.

To learn more about the Home Buyer Assistance Program and a complete list of approved lenders, please visit
www.cityofchicago.org/homebuyer or www.chicagoinfrastructure.org

29
Home Buyer Assistance Program- Approved Lenders

For a complete list of approved


lenders, please visit

www.cityofchicago.org/homebuyer

30
MUNICIPAL DEPOSITORY ORDINANCE

Amending the Municipal Depository Ordinance to require all banks, also known
as Municipal Depositories, to disclose community lending information,
mortgage lending information and overall bank health to the Treasurer.

This change will allow the City to ensure that the banks can protect City funds
and invest in every Chicago neighborhood.

Passed September 14th, 2016

31
PREDATORY LENDING- SB2865

Senate Bill 2865 requires alternative lenders to disclose their interest rates on
commercial loans, limits certain types of fees and creates standards that protect
small business owners from economic distress by requiring lenders to assess
borrowers’ ability to repay.

If passed, SB2865 would make Illinois the first state to regulate this very
lucrative industry.

32
12:25 – 12:30
12:00 - 12:05
01 Introduction, Purpose of Call, 06 Guest Speakers: Shari Runner
from the Chicago Urban League
Agenda

Agenda 02 12:05 – 12:10


and Jimmy Lee from GoodCity

12:30 – 12:35
National Economy 07 Investment Funds Nationally
and Locally

12:10 - 12:15 12:35 – 12:45


03 Chicago Economy 08 Community Catalyst Fund
Overview

12:15 – 12:20 12:45 – 12:50


04 CTO Investment Portfolio
Update
09 CTO Initiatives

12:20 – 12:25 12:50 – 1:00


05 Closing the Gap 10 Q&A

33
Q&A

34
DEBRIEF AND CLOSING

Follow Us Join a Think Tank Feedback Share


Keep the Let us know what you thought Invite friends and family to
Twitter:@kurtasummers conversation going in
Facebook: /summerschicago about our call. Email us at join our next call and stay
your neighborhood! city.treasurer@cityofchicago.org engaged.
bit.ly/77ThinkTanks

VISIT US AT WWW.CHICAGOCITYTREASURER.COM

35
Thank You For Joining

36
DISCLAIMER

PLEASE NOTE:

This presentation has not been prepared to give information for making
decisions on buying or selling securities and should not be relied upon by
investors in making investment decisions.

With respect to any bonds, notes, or other debt issued by the City of
Chicago, please refer for information only to the City’s disclosure documents
and continuing disclosure filings for such bonds, notes, or other debt
obligations.

37