HomeMy WebLinkAboutItem 4.3 Treasurer's Invesment Rpt
STAFF REPORT CITY CLERK
File #320-30
CITY COUNCIL
DATE:March 5, 2013
TO:
Honorable Mayor and City Councilmembers
FROM:
Joni Pattillo, City Manager
SUBJECT:
City Treasurer's Report of Investments for the Period October 1, 2012 to
December 31, 2012
Prepared by Jim O'Leary, Interim Administrative Services Director
EXECUTIVE SUMMARY:
The City’s Investment Policy calls for a semi-annual report of investments to be reviewed by the
City Council. This is an informational report for the period from October 1, 2012 through
December 31, 2012. The City's investment portfolio totals $139,596,300 (par value). As of
December 31, 2012, funds were invested at an average yield of 0.905%. The portfolio includes
both discretionary and restricted funds and the balance fluctuates throughout the year. This
report provides information on the City investment portfolio, in addition to the investment results,
as of December 31, 2012.
FINANCIAL IMPACT:
Investments are made in accordance with the City Investment Policy and state law. Interest
earned is apportioned among funds (i.e. General Fund, Gas Tax Fund, etc.) based on each
fund’s proportionate share of the total cash balance. The current earning rate nearly meets the
projection used for the Adopted Budget and Financial Plan, 2012-3 and 2013-14. Actual interest
revenue earned is impacted by both the interest rate earned and the balance invested.
RECOMMENDATION:
Staff recommends that the City Council receive the report.
Submitted By Reviewed By
Interim Administrative Assistant City Manager
Services Director
DESCRIPTION:
The format of this report consists of sections on Investment Results for October to December
2012, Investment Activity during Second Quarter, Composition of Portfolio, Monthly
Transactions, and Recent Trends Compared to Budget. The attachment includes the Portfolio
Summary, Portfolio Details - Investments, various charts depicting investments by type, Aging
Report, and three monthly Cash / Checking Activity Reports.
ITEM NO. 4.3
Page 1 of 4
Investment Results October to December 2012
As shown on the Portfolio Summary, the total of the investments as of December 31, 2012 was
$139,596,300. The Yield to Maturity was calculated at 0.905% and the weighted average
maturity of the portfolio was 415 days (1.1 years). The report also displays the weighted
average maturity based on Call Date. If all securities were assumed to be called the portfolio
average maturity drops to 263 days (0.7 years).
The Market Value, as of December 31, 2012, was approximately $742,000 more than the Par
Value (Par Value at $139,596,300 and Market Value at $140,338,300). The Par Value is the
face value or principal amount at maturity of the note or bond. The investment approach used
by the City is to hold investments until maturity. The City does not actively sell securities prior to
their maturity. In the current market, the premature liquidation of a security would result in less
interest income upon reinvestment, diluting any gain achieved from selling the investment prior
to its stated maturity.
The following table displays the comparative results based on information in the Portfolio
Summary for the most recent five quarters. This allows for a comparison to the most recent
quarters as well as the same quarter one year ago.
Table 1: Composition of Portfolio Measures
Most Recent Five Quarters
2011/12 2011/12 2011/12 2012/13 2012/13
Portfolio Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2
Measure (Oct-Dec (Jan - Mar (Apr- Jun (Jul-Sept (Oct-Dec
2011) 2012) 2012) 2012) 2012)
$112,918,989 $111,424,381 $125,608,900 $126,808,800
Par Value
$139,596,300
Average 467 days 423 days 413 days 352 days 415 days
(1.28 yrs.) (1.16 yrs.) (1.13 yrs.) (0.96 yrs.) (1.14 yrs.)
Term
1.195% 1.090% 1.024% 0.933%
Yield To
0.905%
Maturity/Call
The total portfolio has increased from the amounts at both December 2011 and September
2012. The collection of one-time payments and Impact Fees contributed to the balances
reported. The total portfolio fluctuates between fiscal years based upon several factors
including: planned expenditures; fluctuations in revenue collected; and differences in timing of
both revenue and expenditures. The timing of revenue collection and issuance of payments
also impacts the balance available to the portfolio. The balance is also impacted by the lag in
the billing for contract Police and Fire Services.
The average maturity of the investments held has decreased slightly over the past year from
1.28 years to 1.14 years. The City has not made purchases of longer term investments (beyond
2017) and an increased balance ($19,000,000) is currently held as investments of 1 year or
less. The investment opportunities and yield on longer term investments have remained at
historic low rates. It is currently expected that the Federal Treasury will continue with current
policies aimed at keeping interest rates low for at least the next year and possibly longer.
Page 2 of 4
Investment Activity during Second Quarter
There were no changes in existing securities due to maturities or calls. Three new investments,
with a combined par value of $12,000,000, were purchased during the second quarter.
Table 2: Investments Purchased During Second Quarter
Effective Yield
Date Value at Maturity Coupon with Discount
Type* Acquired Maturity Date Rate Call Date
FNMA 11/27/2012 $4,000,000 10/27/2015 0.40% 0.417% N/A
FHLMC 11/28/2012 $4,000,000 11/28/2017 0.85% 0.85% 11/27/2014
FHLB 12/13/2012 $4,000,000 12/8/2017 0.75% 0.75% N/A
Total
$ 12,000,000
-
* FNMAFederal National Mortgage Association, FHLMC – Federal Home Loan Mortgage Corporation, and FHLB
– Federal Home Loan Bank
Only the FHLMC issue was purchased with a call provision. The effective yield for the FNMA is
more than the stated coupon for the security, as it was purchased at a discount. The first
security listed above coupon rate of 0.40% and an effective yield of 0.417%. The $4,000,000
face value bond was purchased for $3,999,700 and factoring this in results in a slightly
increased yield. Securities can sell for either a premium or discount depending on the market
on the day the security is purchased. The premium or discount is allocated over the life of the
investment in the City accounting records.
Composition of Portfolio
Attachments to the staff report include charts which assist with reviewing the portfolio. The
charts focus on key factors to monitor including the investment maturities as well as the
composition of the portfolio. The following are key highlights of the portfolio:
At December 31, 2012, 51.29% of the portfolio was immediately available in the Local
Agency Investment Fund (LAIF) and Money Market instruments (Money Market and
CAMP); this is slightly less than the more than the 55.84% reported as of September 30,
2012.
Federal Agency Securities represent 48.71% of the portfolio.
There is diversity in the issuers of the federal securities held in the portfolio. A total of
four different issuers were represented. (FNMA-31%; FHLB – 43%; FFCB-6% and
FHLMC-20%).
65% of the funds are invested for one year or less compared to 67% reported in this
category as of December 31, 2012.
Monthly Transactions
The Cash / Checking Activity Reports provide a list of transactions related to investments in the
City portfolio for each month covered by the report (October, November, and December). This
schedule provides compliance with the Government Code requirement to disclose monthly
transaction data.
Page 3 of 4
Recent Trends Compared to Budget
The assumptions used to project FY 2012-13 revenue earned from investments included a
Local Agency Investment Fund (LAIF) return of 0.50% and an estimated total portfolio rate of
1.10%. The rate for LAIF during the first quarter was below this threshold.
Table 3: Local Agency Investment Fund (LAIF) Quarterly Rate
2011/12 2011/12 2011/12 2012/13 2012/13
Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2
(Oct-Dec (Jan-Mar (Apr-Jun (Jul-Sept (Oct-Dec 2012)
2011) 2012) 2012) 2012)
0.38% 0.37% 0.36 % 0.35 %
LAIF RATE
0.35 %
The total portfolio earnings of 0.905% are below the 2012-13 budgetary assumption. On an
annualized basis, this lower interest rate could cause a small decrease in total interest revenue
for all funds. Since only two quarters of data are available, it is too early to recommend any
adjustment. Staff will continue to monitor conditions and provide updates as part of the
investment reports.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENT:
1. Investment Report, for the Period October 1, 2012 – December 30,
2012
Page 4 of 4