Title
Recommendation to Accept the Treasury Report for the Quarter Ending September 30, 2014. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: John A. Russo, City Manager
Re: Recommendation to Accept the Treasury Report for the Quarter Ending September 30, 2014
BACKGROUND
Each fiscal quarter, an Investment Summary Report is provided to the City Council for review, per City policy. Attached is the Treasury Report for the fiscal quarter ending September 30, 2014, which includes detailed information on the City's investments.
DISCUSSION
The investment report includes all cash and investments as summarized in the six categories listed below as of September 30, 2014. The investment portfolio's average yield of .35% (before adjustments for changes in market value) is slightly over the two-year rate for U.S. Treasury bills, which was .32% as of September 30, 2014.
The investments in Federal/Agency Issues and Medium Term Notes/Commercial Pager are managed by PFM Asset Management and Chandler Asset Management, the City's two registered investment advisors. PFM is responsible for managing investments ranging from one to three years, and Chandler manages investments ranging from one to five years, all of which have been made in accordance with the City's investment policy. These advisors invested approximately 65% of the portfolio investments in U.S. treasuries and agency notes and 35% in Corporate Notes and Commercial Paper. Most of these investments were rated either AA or AAA by independent rating firms, with none having a rating below an A-.
As of September 30, 2014, approximately 59% of the State's Local Agency Investment Fund (LAIF) investments were in U.S. treasuries and agency notes, 15% in CDs, and 26% in other types of investments. Additional economic summaries and specific information related to each of the investment advisors and LAIF is included in the Quarterly Investment Report, attached to this report.
Governmental Accounting Standards Board Statement 40 requires the City to recognize the fair market value of its investments at the end of each fiscal year. The market values of investments included in this report are obtained from the State Controller's office for LAIF and from the City's registered investment advisors and bond trustees for longer term investments. These market valuations are subject to daily changes in market value. The change in market values is considered to be temporary in nature, as it is the City's general intention to hold its investments until maturity, when they would be redeemed at market value.
Of the total cash and investments reported above, only the portions held in the City's General Fund (approximately $23.5 million, or 15%) and Internal Service Funds (approximately $19 million, or 12%) are unrestricted, although a portion of these amounts may be committed for existing obligations or designated for specific purposes. The remaining $114 million (73%) of the City's cash and investments are restricted for specific uses, in accordance with federal, State or local agency rules and regulations.
FINANCIAL IMPACT
The City's expenditure requirements for the next six months are covered by anticipated revenues from City operations and liquidity from maturing investments. The difference between market value and cost as of September 30, 2014 will be reflected in the City's financial statements for Fiscal Year 2014-15 as an adjustment to interest income for each of the City's funds on a pro rata basis as required by Governmental Accounting Standards Board Statement Number 31.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
All investments were made in accordance with the provisions of the City's approved Investment Policy. The policy emphasizes safety, liquidity and diversification.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378 (b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities (acceptance of the Treasury report), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Accept the Treasury Report for the quarter ending September 30, 2014.
Respectfully submitted,
Juelle-Ann Boyer, Interim Finance Director
By,
Brad Farmer, Finance Supervisor
Exhibit:
1. Investment Portfolio
cc: Kevin Kennedy, City Treasurer