HomeMy WebLinkAbout1998-01-26 City Council (13)TO:
FROM:
City
City of Palo Alto
Manager’s Report
HONORABLE CITY couNcIL
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:JANUARY 26, 1998 CMR:123:98
SUBJECT:CITY OF PALO ALTO’S INVESTMENT ACTIVITY REPORT FOR
THE SECOND QUARTER, FISCAL YEAR 1997-98
RECOMMENDATION
Staff recommends that Council amend the existing City Investment Policy so that portfolio
performance is reported to Council. on a quarterly basis and monthly reports be discontinued.
BACKGROUND
The City’s Investment Policy requires that staff report to Council on: the City’s portfolio
composition compared to Council-adopted policy, portfolio performance, and other key
investment and cash flow information.
DISCUSSION
Recommended Changes to City’s Investment Policy
Currently, information on the City’s investment portfolio is conveyed to Council through
monthly and quarterly reports. Since all information provided in the monthly reports is
consolidated in the quarterly report with more detail, and trends in the portfolio are more
clearly depicted on a quarterly basis, staff recommends discontinuing monthly reports to
Council (an example of the last monthly report is provided as Attachment E). Staffproposes
that Council approve a change to the City’s Investment Policy (Attachment D) so that
reporting is made only on a quarterly basis. This will result in a savings in staff preparation
time of about 25 hours per year. Given the more complete information in the quarterly
reports, unless the City Council finds the monthly reports particularly useful, staff believes
this time savings to be worthwhile. Quarterly reporting meets State government code
requirements.
CMR:123:98 Page 1 of 4
Current Investment Portfolio as of December 31, 1997
The City’s investment portfolio is detailed in Attachment B. It is grouped by investment
type and includes the category of investment, date of maturity, current market value, as well
as the book and face (par) value, and the weighted average maturity of each type of
investment and of the entire portfolio as of December 31, 1997.
The face value of the City’s portfolio is $241.8 million. The portfolio consists of $15.2
million in liquid money market accounts and $226.6 million in Federal agency notes and
Treasury securities. The $226.6 million includes $112.2 million in investments maturing in
less than two years, which represents 49.5 percent of the City’s investment in notes and
securities. The current market value of the portfolio is 100.6 percent of the book value.
Bond yields have declined recently, meaning that market prices, which move in the opposite
direction of yields, have gone up. Because the Clty’s investment policy and practice is.to
hold securities until they mature, changes in market price do not affect what the City earns
in real dollars. The average life to maturity of the investment portfolio is 2.2 years. The
market valuation is provided by Union Bank of California, which is the City’s safekeeping
agent.
¯Investments Made During the Second Quarter
During the second quarter of the fiscal year, the City’s portfolio grew by $6.0 million. Staff
replaced $15 million in matured and called U. S. Government agency securities that had an
average yield of 6.0 percent, with $28 million in U. S. securities having an average yield of
6.23 percent. Of the $28 million purchased, only one security had a maturity greater than 3
years. Finally, short-term money market funds decreased by $7.0 million compared to last
quarter.
Availability_ of Funds for the Next Six Months
The normal flow of revenues from the City’s utility billings, sales and property taxes,
transient occupancy taxes and general user fees is sufficient to provide funds for ongoing
expenditures. Projections indicate receipts will be $110.6 million and expenditures will be
$103.8 million over the next six months, indicating an overall portfolio growth of about $6.8
million. As of December’s end, $15.2 million was also available in funds which could be
withdrawn on a daily basis from the City’s Local Agency Investment Fund and Fidelity
money market fund investments. In addition, securities totaling $20.0 million will mature
between January, 1998 and June, 1998. On the basis of the above projections, the City will
have more than sufficient funds to meet expenditure requirements for the next six months.
Compliance with City, Investment Policy
During the second quarter of 1997-98, staff complied with all aspects of the investment
policy. Attachment C lists the restrictions in the City’s investment policy compared with the
portfolio’s actual compliance.
CMR:123:98 Page 2 of 4
Investment Yields
Interest income on an accrual basis for the second quarter of 1997-98 was $3.7 million.
Year-to-date, the City has earned $7.2 million, or 53.9 percent of the $13.4 million budgeted
for 1997-98. As of December 31, the yield to maturity of the City’s portfolio was 6.12
percent. LAIF’s yield for the past quarter was 5.71 percent, while the yield on the two-year
Treasury note at the end of December was 5.69 percent.
Yield Trends
During this quarter, the Federal Reserve Open Market Committee (FOMC) made no change
in either the discount rate or the federal funds rate. The economy continues to remain strong
based onrecent jobs, inventory and wage data, but there are cautions about continued robust
growth based on financial events in Asia. Inflationary indicators have been tame and are
expected to be further curbed as cheaper Asian exports compete with American goods. It
appears that the FOMC’s concern about tight labor markets has been tempered by potential
deflationary pressures resulting from cheaper imports. Interest rate hikes are not expected
in the near future. Bond yields have been moving lower in the latter part of the second
quarter as the demand for safe and secure U.S. bonds increases, thereby pushing bond prices
up (bond interest yields move in the opposite direction of bond prices).
Funds Held by the City or Managed Under Contract
Attachment A is a consolidated report of all City investment funds, including those not held
directly in the investment portfolio. Those include cash in the City’s regular bank account
with Bank of America; bond proceeds, which the City itself manages in a separate
investment account; bond reserves and debt service payments being held by the City’s fiscal
agents; and employee deferred compensation accounts, whose investment is directed by the
individual employee but are technically considered City funds reserved for the employees.
The most recent data on the funds held by the fiscal agent is as of December 31, 1997, while
the balances in the deferred compensation accounts are as of September 30, 1997.
RESOURCE IMPACT
There is no fiscal impact.
POLICY IMPLICATIONS
The recommendation to report portfolio performance solely through the quarterly report to
Council represents a change to the City’s Investment Policy shown in Attachment D.
ENVIRONMENTAL REVIEW
There is no environmental assessment required for this report.
CMR: 123:98 Page 3 of 4
ATTACHMENTS
A)Consolidated Report of Cash and Investments
B)Investment Portfolio, as of December 31, 1997
C)Investment Policy Compliance
D)Proposed Changes to Page 6 of the City’s Investment Policy
E)Monthly Report Example
PREPARED BY: Joe Saccio, Senior Financial Analyst
DEPARTMENT HEAD:
Mel~sa Cavallo
Acting Director
Administrative
,)
CITY MANAGER APPROVAL:
Fleming
~O~- ity Manager
CC: n/a
CMR:123:98 Page 4 of 4
Attachment A
Consoli~-!ated Report ¯
City of Palo Alto Cash and Investments
Second Quarter, Fiscal Year 1997-98
Book Value Market Value
City_ Investment Portfolio (see Attachment B)$242,363,359 $ 243,903,416
Other Funds Held by the City
Cash with Bank of America
1995 Utility Revenue Bond Proceeds
Fidelity Fund - Treasury Class I
Total for Other Funds
$2;930,810
3,725,68!.
6,656,491
$2,930,810
...3,725,681
$ 6,656,491
Funds Under Management of Contracted Parties
Fiscal Agent Debt Servi¢.e Payments and Reserves
First Trust California
Golf Course Corporation Lease/Reserve Fund
Palo Alto Public Improvement Corporation
Lease/Reserve Fund
Total Under Management
Employee Deferred Compensation Accounts
(September 30, 1997)
Great Western Bank
ICMA Retirement Corporation
ITT Hartford
Total
GRAND TOTAL
$i66,756
766,588
$ ~33,344
$ 759,333
20,040,626
30,672,372
$51,472,331
$3.01,425.,525
$166,756
766.5.88
$ 933,344
$ 759,333
20,040,626
30.672.372
$ 51,472,331
$ 302.965.582
ATTACHMENT B
01/15/1998 ~-~.i÷ Clty of Palo Alto "FI -1
CPAINVESTMENTS BY TYPE ACCa~
DECEMBER 31, 1997
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
~JMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 560 365 DATE TO MAT
MANAGED POOL ACCOUNTS
158 Pzdeli~y Investments
159 Local Agency Invest. Fund
1,478,970.21 1,478;970.21 1,478,970.21 5.460 5.385 5.460
13,721,000.00 13,721,000.00 13,721,000.00 5.684 5.606 5.684
SUBTOTALS and AVERAGES 15,199,970.21 15,199,970.21 15,199,970.21 5.585 5.662
FEDERAL AGENCY ISSUES - COUPON
221
222
146-Cali
147-Cali
148-Call
149-Cali
150-Call
166
167-Cali
172
173
177-Cali
179-Cali
~87
188
189
202
203
205
206
207
210
215
216
228
238
239
246
25O
178-Cali
212
213
217
218
229
230
231
240
120
Federal Farm Credit Bank
Federal Farm Credit Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Nat Mortgage Assn
02/04/9702/04/97
02/18/94
02/14/94
02/09/94
02110194o2/11/94
11/16/95
12/27/95
02/15/96
02/15/96
02/21/96
02/28/96
o4/23/96
04/23/96
05/06/96
08/09/96
09/27/96lO/25/96
11/15/9611/15/96
12/18/96
01/28/97
01128197
o4/17/9706126197
07/11/97
11114/9712118197
02/23/96
1211819612/18/96
01110197
-O1/lO/97
o4/14/97
o4/16/97
o4/14/97
O9/lO/97
Ol/11/93
1,096,765.03 1,100,000.00 1,118,909.00 6.420 6.416 6.505 02/04/02 1,495
898,734.14 900,000.00 915,471.00 6.420 6.372 6.461 02/04/02 1,495
2,000,000.00 2,000,000.00 1,991,560.00 5.380 5.496 5.572 12/14/98 347
2,000,000.00 2,000,000.00 1,991,560.00 5.380 5.496 5.572 12/14/98 347
2,000,000.00 2,000,000.00 1,991,560.00 5.380 5.496 5.572 12/14/98 347
2,000,000.00 2,000,000.00 1,991,560.00 5.380 5.496 5.572 12/14/98 347
2,000,000.00 2,000,000.00 1,991,560.00 5.380 5.496 5.572 12/14/98 347
4,998,205.96 5,000,000.00 4,996,850.00 5.660 5.706 5.785 11/09/98 312
3,000,000.00 3,000,000.00 2,990,160.00 6.250 6.193 6.279 12/27/00 1,091
2,000,168.18 2,000,000.00 1,998,440.00 4.920 4.835 4.902 02/09/98 39
4,004,456.86 4,000,000.00 3,971,240.00 5.055 4.945 5.014 02/09/99 404
1,550,000.00 1,550,000.00 1,538,855.50 5.965 5.965 6.048 02/21/01 1,147
2,000,000.00 2,000,000.00 1,982,500.00 5.860 5.860 5.941 02/28/01 1,154
2,000,000.00 2,000,000.00 2,009,060.00 6.100 6.100 6.185 04/23/99 477
2,000,000.00 2,000,000.00 2,009,060.00 6.100 5.100 6.185 04/23/99 477
2,000,000.00 2,000,000.00 2,010,940.00 6.210 6.210 6.296 05/06/99 490
4,001,263.04 4,000,000.00 4,016,880.00 6.260 6.153 6.238 08/09/99 585
3,001,896.78 3,000,000.00 3,026,730.00 6.335 6.208 6.294 09/23/99 630
"2;230,235.97 2,235,000.00 2,242,330.80 6.050 6.096 6.180 10/25/99 662
1,153,266.93 1,150,000.00 1,152,530.00 6.030 5.780 5.860 11/08/99 676
2,007,545.73 2,000,000.00 2,009,380.00 6.090 5.781 5.862 11/01/99 669
990,098.83 990,000.00’994,643.10 6.090 5.997 6.081 11/01/99 669
999,868.58 1,000,000.00 1,008,440.00 6.173 6.096 6.180 01/28/00 757
1,998,811.20 2,000,000.00 2,016,880.00 6.173 6.120 6.205 01/28/00 757
2,994,622.40 3,000,000.00 3,052,500.00 6.670 6.665 6.758 04/17/00 837
2,995,794.27 3,000,000.00 3,053,430.00 6.400 6.349 6.437 06/26/02 1,637
3,007,504.34 3,000,000.00 3,028,590.00 6.225 6.031 6.115 07/11/00 922
4,997,384.63 5,000,000.00 5,010,950.00 5.950 5.970 6.053 11/14/00 1,048
2,999,165.93 3,000,000.00 3,002,340.00 5.835 5.850 5.931 12/16/99 714
2,000,000.00 2,000,000.00 1,973,120.00 5.600 5.600 5.678 02/23/01 1,149
1,008,194.36 1,000,000.00 1,013,750.00 6.550 6.015 6.098 01/04/00 733
1,008,142.82 1,000,000.00 1,013,750.00 6.550 6.015 6.098 01/04/00 733
1,344,327.83 1,285,000.00 1,368,525.00 7.900 6.352 6.440 09/19/01 1,357
3,012,053.57 3,000,000.00 3,066,570.00 6.520 6.313 6.401 01/02/02 1,462
1,987,146.44 2,000,000.00 2,061,560.00 6.780 6.865 6.960 04/10/02 1,560
2,985,917.97 3,000,000.00 3,107,340.00 6.830 6.866 6.961 04/16/02 1,566
1,986,744.76 2,000,000.00 2,061,560.00 6.780 6.871 6.966 04/10/02 1,560
2,008,794.12 2,000,000.00 2,027,180.00 6.400 6.122 6.207 08/01/00 943
999,997.14 1,000,000.00 1,000,310.00 6.050 5.978 6.061 01/12/98 Ii
ATTACHMENT B
01/15/19~8 City of Palo Alto
INVESTMENTS BY TYPE
DECEMBER 31, 1997
FI -2
CPA
ACCRUAL
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
NUMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
FEDEP3tL AGENCY ISSUES -COUPON
121 Fed Nat Mortgage Assn 01/11/93
122 Fed Nat Mortgage Assn 01/12/93
123 Fed Nat Mortgage Assn 10/05/95
124 Fed Nat Mortgage Assn 10/06/95
168 Fed Nat Mortgage Assn 01/26/96
170 Fed Nat Mortgage Assn 01/26/96
171 Fed Nat Mortgage Assn 02/09/96
180 Fed Nat Mortgage Assn 03/07/96
181 Fed Nat Mortgage Assn 03/13/96
186 Fed Nat Mortgage Assn 04/18/96
194 Fed Nat Mortgage Assn 05/06/96
195 Fed Nat Mortgage Assn 05/06/96
196 Fed Nat Mortgage Assn 05/31/96
197 Fed Nat Mortgage Assn 05/31/96
200 Fei Nat Mortgage Assn 07/11/96
201 Fed Nat Mortgage Assn 07/11/96
204 Fed Nat Mortgage Assn 10/25/96
211 Fed Nat Mortgage Assn 12/18/96
214-Cali Fed Nat Mortgage Assn 01/14/97
219 Fed Nat Mortgage Assn 01/13/97
220 Fed Nat Mortgage Assn 02/03/97
223 Fed Nat Mortgage Assn 03/07/97
224 Fed Nat Mortgage Assn 03/07/97
225 Fed Nat Mortgage Assn 03/07/97
226 Fed Nat Mortgage Assn 03/21/97
227 Fed Nat Mortgage Assn 03/21/97
232-Cali Fed Nat Mortgage Assn 04/14/97
233-Cali Fed Nat Mortgage Assn 04/14/97
234 Fed Nat Mortgage Assn 05/21/97
235 Fed Nat Mortgage Assn 06/25/97
236 Fed Nat Mortgage Assn .06/25/97
237 Fed Nat Mortgage Assn 06/26/97
241-Cali Fed Nat Mortgage Assn 09/10/97
242 Fed Nat Mortgage Assn 09/25/97
243 Fed Nat Mortgage Assn 09/29/97
244 Fed Nat Mortgage Assn 10/22/97
245 Fed Nat Mortgage Assn 10/22/97
247 Fed Nat Mortgage Assn 12/08/97
248 Fed Nat Mortgage Assn 12/II/97
249 Fed Nat Mortgage Assn 12/11/97
251 Fed Nat Mortgage Assn 12/31/97
169 Student Loan Mktg. Assn 01/26/96
SUBTOTALS and AVERAGES
TREASURY SECURITIES - COUPON
182 U.S. Treasury
1,999,994.27
1,999 994.27
4,000 388.18
4,000 378.58
4,.001 529.87
4,292 925.61
3,003 782.36
2,994 2~4.80
2,980 901.59
1,993 112.37
1,993 963.42
1,762 359.21
2,267 231.07
2,056 445.42
2,620819.98
2,282 147.67
1,996 419.79
994 038.43
3,000 000.00
2,002 484.92
4,142 740.60
1,977 548.17
1,482 657.03
1,483 342.92
1,494 623.97
1,494 446.25
1,969 313.39
2,957 871.88
2,994 671.52
2,011 740.97
2,012.022.23
2,020 857.73
3,000.000.00
4,997,485.33
3,992,712.32
2,977,190.99
2,979,264.52
5,002,924.79
2,001,180.56
3,127,585.78
4,000,760.00
4,151,678.05
2,000,000.00
2,000,000.00
4,000,000.00
4,000,000.00
4,000,000.00
4,000,000.00
3,000,000.00
3,000,000.00
3,000,000.00
2,000,000.00
2,000,000.00
1,790,000.00
2,205,000.00
2,000,000.00
2,705,000.00
2,300,000.00
2,000,000.00
1,000,000.00
3,000,000.00
2,000,000.00
4,000,000.00
2,000,000.00
1,500,000.00
1,500,000.00
1,500,000.00
1,500,000.002,000,000.00
3,000,000.00
3,000000.00
2,000 000.00
2,000000.00
2,000 000.00
3,000 000.00
5,000 000.00
4,000 000.00
3,000 000.00
3,000 000.00
5,000 000.00
2,000 000.00
3,000 000.00
4,000 000.00
4,000 0O0.00
2,000,620.00 6.050 5.978 6.061 01/12/98 Ii
2,000,620.00 6.050 5.978 6.061 01/12/98 ii
4,005,000.00 5.950 5.854 5.935 09/28/98 270
4,005,000.00 5.950 5.854 5.935 09/28/98 270
3,968,120.00 5.550 5.459 5.535 01/17/01 1,112
4,248,120.00 8.900 5.415 5.490 06/12/00 893
2,980,770.00 5.200 5.087 5.158 01/25/99 389
2,984,520.00 5.280 5.385 5.460 03/01/99 424
2,988,750.00 5.400 5.907 5~989 03/12/99 435
2,000,320.00’5.840 6.061 6.145 03/29/99 452
2,043,740.00 6.625 6.641 6.733 04/18/01 1,203
1,806,503.80 6.160 6.631 6.723 04/03/01 1,188
2,186,263.60 8.700 6.421 6.510 06/10/99 525
2,186,263.60 8.700 6.421 6.510 06/10/99 525
2,691,907.80 5.720 6.779 6.873 03/08/01 1,162
2,349,956.00 6.590 6.766 6.860 05/24/01 1,239
2,009,680.00 6.070 6.’095 6.180 10/18/99 655
999,840.00 5.740 6.080 6.164 12/09/99 707
3,000,480.00 6.470 6.381 6.470 01/14/00 743
2,045,000.00 6.580 6.447 6.537 10/02/01 1,370
4,223,120.00 7.500 6.381 6.470 02/11/02 1,502
2,026,880.00 6.230 6.460 6.550 03/01/02 1,520
1,520,160.00 6.230 6.470 6.560 03/01/02 1,520
1,520,160.00 6.230 6.457 6.547 03/01/02 1,520
1,510,080.00 6.250 6.342 6.430 03/20/00 809
1,510,080.00 6.250 6.348 6.436 03/20/00 809
2,019,680.00 6.630 7.042 7.140 02/04/02 1,495
3,034,680.00 6.680 7.035 7.133 03/14/02 1,533
3,041.,250.00 6.410 6.404 6.493 05/22/00 872
2,054,680.00 6.590 6.342 6.430 05/21/02 1,601
2,054,680.00 6.590 6.337 6.425 05/21/02 1,601
2,055,940.00 6.700 6.332 6.420 06/04/02 1,615
3,005,160.00 6.470 6.381 6.470 08/17/00 959
5,016,400.00 5.970 5.908 5.990 09/25/00 998
4,030,640.00 6.090 6.132 6.217 09/30/02 1,733
3,000,000.00 5.830 6.132 6.217 10/16/00 1,019
3,019,740.00 6.100 6.270 6.357 10/21/02 1,754
4,991,400.00 6.190 6.270 6.357 12/07/00 1,071
1,999,380.00 6.140 6.117 6.202 12/11/00 1,075
3,086,730.00 8.350 5.994 6.077 11/10/99 678
4,010,000.00 5.910 5.888 5,969 02/25/00 785
4,136,240.00 7.500 5.458 5.534 03/08/00 797
201,782,888.62201,210,000.00203,177,129.20 6.067 6.151 896
03/21/96 2,991,I14.73 3,000,000.00 2,994,840.00 5.250 5.792 5.873 07/31/98 211
0!/15/199£
INVESTMENT PURCHASE
NUMBER ISSUER ’ DATE
ATTACHMENT B
Czty of Palo Alto
INVEST~.~ENTS BY TyPE
DECEMBER 31, 1997
BOOK VALUE FACE VALUE MARKET VALUE
STATED ....YTM ....
P~ATE 360 365
FI -3
CPA
ACCRUAL
MATURITY DAYS
DATE TO MAT
TREASURY SECURITIES - COUPON
183 U.5. Treasury 03/21/96
184 U.S. Treasury 03/27/96
185 U.S. Treasury 03/27/96
190 U.S. Treasury 05/01/96
191 U.S. Treasury 05/03/96
192 U.S. Treasury 05/03/96
198 U.S. Treasury 06/17/96
199 U.S. Treasury 07/10/96
2,990,677.08 3,000,000.00 2,995,770.00 5.125 5.797 5.877 06/30/98 180
2,981,200.32 3,000,000.00 2,983,110.00 4.750 5.697 5.776’ 08/31/98 242
2,995,992.95 3,000,000.00 2,997,660.00 5.125 5.634 5.712 03/31/98 89
2,000,499.16 2,000,000.00 2,004,380.00 6.125 5.967 6.050 05/15/98 134
2,000,507.92 2,000,000.00 2,004,380.00 6.125 5.966 6.049 05/15/98 134
3,019,131~93 3,000,000.00 3,044,070.00 6.750 6.158 6.244 05/31/99 515
3,006~917.02 3,000,000.00 3,046,410.00 6.750 6.486 6.576 06/30/99 545
3,008,467.74 3,000,000.00 3,053,430.00 6.875 6.581 6.672 07/31/99 576
SUBTOTALS and AVERAGES 24,994,508.85 25,000,000.00.25,124,050.00 6.013 6.096 305
GINNIE MAE ’ S
161
162
160
Fed Home Ln Mort Corp 07/05/83
Fed Home Ln Mort Corp 02/16/79
Govt. Natl. Mortgage Assn 01/26/87
31,695.90 30,922.83 29,219.76 12.450 11.875 12.039 09/15/09 4,275
87,734.76 89,278.53 96,549.34 10.000 10.120 10.261 02/01/09 4,049
266,560.68 258,561.43 276,497.90 9.000 8.449 8.566 11/15/16 6,893
SUBTOTALS and AVERAGES
TOTAL INVESTMENTS and AVERAGES
385,991.34 378,762.79 402,267.00 9.110 9.236 .6,032
241,788,733.00
242,363,359.02 243,903,416.41 6.036% 6.120% 787
Attachment C
Investment Policy Compliance
as of December 31, 1997
No more than 10 percent of the portfolio in collateralized Certificates of
Deposit (CDS) of any institution.
No more than 30 percent of the portfolio in Banker’s Acceptance Notes.
- No more than $5 million with any one institution.
No more than 15 percent of the portfolio in Commercial Paper.
- No more than $3 million with any one institution.
Limit investments exclusively to those stipulated under types of investment.
No more than 10 percent of the portfolio in Farm Credit Securities.
No more than 2 percent of the portfolio in the Guaranteed Portion of Small
Business Administration Notes.
No more than 20 percent of portfolio in Mutual Funds with no more than 10
percent of portfolio in any one Mutual Fund.
No more than 20 percent of portfolio in callable or Multi-Step-up
government agency securities.
0.00%
0.00%
0.00%
Noexceptions
.83%
0.00%
.62%
12.22%
Enough liquidity to meet one month’s cash needs.$15.2 million
At least $50 million maturing in less than 2 years.$112.2 million
No more than 20 percent of the portfolio shall be in investments maturing in .16%
more than five years.
Market value of the portfolio will exceed 95 percent of the amortized cost 100.6%
basis of the portfolio.
a:inveomp I
The following are liquidity constraints:
o Liquidity enough to meet one month’s cash needs.
o At least $50 million maturing in less than 2 years.
No more than 20 percent of the portfolio shall be in investments maturing in
more than five years. Investments placed beyond a five-year term shall be
supported by: cash flow projections indicating a p|an to hold the funds for an
extended period of time; historical yield information that indicates available
longer term yields are attractive, relative to historical yields.
O Any security purchased with a maturity greater than 10 years may pay
principal, as well as interest, on a periodic basis.
O Should the ratio of the market value of the portfolio to the cost basis of the
portfolio fall below 95 percent, the Administrative Services Department will
report this fact to the City Council within a reasonable time frame and
evaluate whether there is any risk of holding any of the securities to maturity.
O Commitments to purchase securities newly introduced on the market shall
be made no more than three (3) working days before pricing.
Yield - The third objective shall be to achieve a return on the funds.
Yield, which is defined as the return on an investment, will be the third criteria for
investments, after safety and liquidity.
Whenever possible, the City will obtain three or more bids on the purchase or sale of
comparable securities and take the higher yield on purchase or higher price on sale. This
rule will not apply to new issues which are purchased at market no more than three (3)
working days before pricing, LAIF, City of Palo Alto bonds, money market accounts or
mutual funds, which shall be evaluated separately.
POLICY REVIEW AND REPORTING ON INVEST..MENTS
Monthly, the Administrative Services Department will review performance in relation to the
Council-adopted Policy. ;~c, nth~y Quarterly, the Department will report to the Council, in
a manner approved by the Council, its performance in relation to this policy and explain
any deviation from the policy and recommendations for changes, if any. ~ In the
report, the Department will provide to the Council a detailed list of all securities,
investments and moneys held by the City, and report on compliance with the City’s
Investment Policy, and the ability to meet the expenditure requirements of the City for the
next six months.
6
ATTACHMENT E
CURRENT PORTFOLIO:
City of Palo Alto
Investment Activity
November, 1997
Type of Investments
The par value of the City’s portfolio is $237.5 mil-
lion, $1.5 million higher than October’s portfolio. The
237.5 million includes $17.9 million in liquid funds
and $102.6 million in securities maturingwithin two
years. Ninety three percent of the investments, or
$219.6 million, are in United States treasuries and gov-
ernment agency securities. The market value of
November’s portfolio is 100.47 percent of book value,
reflecting a recent decrease in interest rates on fixed
income securities. The average life of investments is
2.13 years.
US T-NOTES $25.0M 10 5%
LA{F $14 2M ~, 0%
MUTUAL FUND $3 7M 1.6%
GOVTAGENCY $194.6M 81.9%
LAIF: Local Agency Investment Fund
US T-NOTES: Treasury Notes
MUTUAL FUND: Fidelity Money Market
GOVT AGENCY: US Agency Notes
Year-to-Date Investment Income INTEREST INCOME:
$7,000,000
$5,0~0,000
$3,000,000
$2,000,000
$0
Interest income on an accrual basis for November is
$1.21 million. For the first five months of 1997-98,
interest income totalled $5.9 million, or 44.0 percent
of the annual budget of $13.4 million. The overall
yield on the portfolio as of November’s end is 6.12
percent.
NOVEMBER’S INVESTMENTS AND YIELD
TRENDS:
One new investment totalling $5 million with a yield
of 5.97 percent was purchased duringNovember. This
replaces $5.0 million in U.S. Government agency
notes maturing during the month. Overnight funds now
total $17.9 million and are sufficientto meet any short-
term cash needs.
The Federal Open Market Committee has made no
change in either the federal funds overnight target or
in the discount rate since March of 1997. Bond yields
fluctuated during November as a result of the Asian
economic crisis. Yields on long-term investments
have dropped significantly, while yields on the two-
year notes have hovered around 5.7 percent.
Yield Trends
Prepared by:
Administrative Services Department
12/19/9 7 ~