Title
Recommendation to Accept the Investment Report for the Quarter Ending March 31, 2021. [City Council and SACIC] (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
This report presents the City of Alameda’s (City) investment portfolio for the quarter ending March 31, 2021. The report includes all funds managed by the City as part of its Investment Portfolio and provides information on the investment type, issuer, maturity date, cost, and current market value for each security.
The report has been prepared to comply with regulations contained in California Government Code Section 53646 and the City’s Investment Policy.
The City’s Investment Portfolio is in compliance with its Statement of Investment Policy.
The City has sufficient funds to meet its pool’s expenditure requirements for the next six months.
The report also highlights monies held in Irrevocable Trust with the Public Agency Retirement Services (PARS). The Trust has been set up to reduce the cost of the City’s post-employment liabilities (pensions & healthcare costs). This balance is included for ‘information only’ and does not form part of the City’s Investment Portfolio.
BACKGROUND
Each quarter of the fiscal year, an Investment Report is provided to the City Council for review, per the Investment Policy. Attached is the Investment Report for the fiscal quarter ending March 31, 2021 which includes detailed information on the City’s cash and investments.
DISCUSSION
The investment report includes all cash and investments as summarized in the categories listed below as of March 31, 2021. The City utilizes U.S. Bank as its third-party custodian for safekeeping of all investments with the exception of Certificates of Deposit (CDs) purchased through Bank of Marin and Beacon Business Bank.
The City also utilizes the Local Agency Investment Fund (LAIF) as a money market fund administered by the State Treasurer. LAIF has hundreds of local governmental agency participants and holds securities through its own administrator. It provides immediately liquid cash for the City.
As of March 31, 2021, the overall Total Pooled Investment Portfolio ‘Average Yield’ was 1.03%, which is greater than the rate for a two-year U.S. Treasury Note at 0.16%, and also the greater than the LAIF average quarterly rate of 0.36%.
On March 31, 2021, the market value of the total pooled investment portfolio was $1.66 million greater than the book value. As the City does not intend to sell its pooled investment portfolio securities prior to maturity, this will have no effect on yield.
The investments in Federal/Agency Issues, Medium Term Notes/Commercial Paper, Asset Backed Securities, Supranationals and CDs (not held by the Bank of Marin or the Beacon Business Bank) are managed by PFM Asset Management (PFM) and Chandler Asset Management (Chandler), the City’s two registered investment managers.
Both PFM and Chandler are responsible for managing investments of up to five years maturity, all of which have been made in accordance with the City’s investment policy. Detailed reporting on PFM’s and Chandler’s investments are included in the ‘Detail for Investment Portfolio Summary Report’ included in Exhibit 1.
In addition, the City has one CD with the Bank of Marin and one with the Beacon Business Bank.
These investment managers invested approximately 43% of the Total Pooled Investment Portfolios’ investments in U.S. Treasuries, Agency Notes and Municipal Issues, 10% in Corporate Notes and Commercial Paper, 2% in CDs, 7% in Asset Backed Securities and 3% in Supranationals. Most of these investments were rated either A-1/BBB+ or better by nationally recognized statistical rating organizations. Remaining investments were not rated.
The remaining 35% of the Total Pooled Investment Portfolio was deposited with LAIF as of March 31, 2021. LAIF has 76% of its investments in U.S. Treasuries and Agency Notes, 12% in CDs and Bank Notes, and 12% in Other types of investments. Additional economic summaries and specific information related to each of the investment advisors and LAIF are included in the Investment Portfolio Summary Report in Exhibit 1.
Best practice is to show the Market Value for investments along with Book Values. 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 managers. These market valuations are subject to daily changes. The difference between market value and historical costs, known as Unrealized Investment Gains and Losses, are temporary in nature and are not cash related transactions. Since it is the City’s general intention to hold its investments until maturity, when they would be redeemed at par value real losses are highly unlikely. However, Governmental Accounting Standards Board (GASB) Statement 40 requires the City to recognize the fair market value of its investments at the end of each fiscal year, and any unrealized gain or loss is reported at the end of the fiscal year in the City’s Comprehensive Annual Financial Report.
ALTERNATIVES
Accept the report due to no further action being requested.
FINANCIAL IMPACT
The City’s expenditure requirements for the next six months are covered by anticipated revenues from City operations and liquidity from cash on deposit and maturing investments.
In addition to the quarterly summary schedules, the current quarter investment report also includes all the individual transactions that took place during the three months period.
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 CEQA Guidelines, section 15378(b)(4), because it involves governmental fiscal activities (acceptance of the Investment Report), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Accept the Investment Report for the quarter ending March 31, 2021.
CITY MANAGER RECOMMENDATION
The City Manager recommends acceptance of the Investment Report for March 31, 2021.
Respectfully submitted by,
Annie To, Finance Director
Exhibit:
1. Quarterly Investment Report
cc: Eric Levitt, City Manager
Kevin Kennedy, City Treasurer