HomeMy WebLinkAbout1997-01-23 City CouncilCity of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:JANUARY 23, 1997 CMR:122:97
SUBJECT:CITY OF PALO ALTO’S INVESTMENT ACTIVITY REPORT
FOR THE SECOND QUARTER, FISCAL YEAR 1996-97
REO_UEST:
The purpose of this report is to inform Council on the status of the City’s investment
portfolio as of the second quarter of the 1996-97 fiscal year.
RECOMMENDATIONS:
This is an informational report and no Council action is required.
POLICY IMPLICATIONS:
This report does not propose any changes to existing City policies.
EXECUTIVE SUMMARY
Current Investment Portfolio as of December 31, 1996
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, 1996.
The .face value of the City’s portfolio is $213.4 million, which consists of$118 million, or
55 percent, maturing in less than two years. Most of the investments, $203 million, or 95
percent, are in United States governmental securities. The current market value of the
portfolio is 99.9 percent of the book value and the average life is 1.90 years. The market
valuation is provided by Union Bank of California, which is the City’s safekeeping agent.
CMR:122:97 Page I of 3
Investments Made During the Second Quarter
During the second quarter of the fiscal year, the portfolio grew by $5.3 millionl Staff
replaced $5.5 million in maturing U. S. Government agency notes, having an average yield
of 6.4 percent and $4 million in U. S. Treasury notes having a yield of 4.4 percent, with
$11.4 million in U. S. Government agency notes having yields of around 6.10 percent. In
addition, $3 million was invested in callable U. S. Government agency notes with a three
year maturity, callable after one year, with a yield of 6.34 percent. Funds held in short-term
money market funds increased by $400,000 during the 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. Receipts are projected to be $103.3 million and expenditures to be $98.3
million over the next six months, indicating an overall growth of the portfolio of about $5
million. In addition, securities totaling $34.5 million will mature between January 1997 and
June 1997. Also available is $10.5 million in funds which can be withdrawn on a daily basis
from the City’s investments in the Local Agency Investment Fund (LAIF) and Fidelity
money market fund. On the basis of the above projection, there are more than sufficient
funds to meet Palo Alto’s expenditure requirements for the next six months.
Given the growth in the size of the investment portfolio, staffplans to evaluate the amount
of City funds held in longer term reserves, such as the Calaveras Reserve in the Electric
Fund, and consider a strategy to match those longer term reserves with investments in longer
term maturities (i.e. five to ten year term). The City’s investment policy permits up to 20
percent of the portfolio to be placed in investments with maturities of five years or more, yet
only $472,000 was invested in the five year or more term as of December 31, 1996. Staff
will inform the Council of any such changes in investment strategy in the next quarterly
investment report.
Compliance with City Investment Policy
During the second quarter of fiscal year 1996-97, staff complied with all aspects of the
investment policy. Attachment C lists the different restrictions in the City’s Investment
Policy compared with the portfolio’s actual compliance.
Investment Yields
Interest income on an accrual basis for the second quarter of 1996-97 was $3.2 million. For
the first six months of the 1996-97 fiscal year, interest totaled $6.3 million, or 54 percent of
the 1996-97 budget for interest earnings of$11.7 million. The current effective rate ofretum
for the fiscal year is 6.0 percent. This compares to Local Agency Investment Fund’s yield
for the quarter of 5.59 percent, and the yield on the two-year Treasury note of 5.84 percent.
CMR:122:97 Page 2 of 3 ’
During this quarter, the Federal Reserve Open Market Committee (FOMC) made no change
in either the discount rate or the federal funds rate. As of the end of December, most analysts
do not expect the FOMC to change short-term interest rates in 1997, as there is evidence of
a sustainable expansion at a pace of about 2 percent real annual growth in the Gross
Domestic Product. Yields on the 30-year Treasury bonds moved upward in mid-December,
following FOMC Chairman Alan Greenspan’s comments about "irrational exuberance" in
the stock market. The 30-year Treasury bond closed the year at a yield of 6.54 percent.
Funds Held by the City_ or Managed Under Contract
Attachment A is a consolidated report of all City investment funds, including those not held
in the investment portfolio. Those include cash in the City’s Bank of America account; 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, 1996, while the balances in the deferred
compensation accounts are as of September 30, 1996.
FISCAL IMPACT:
This is an informational report with no fiscal impact resulting.
ENVIRONMENTAL ASSESSMENT:
There is no environmental assessment required for this report.
ATTACHMENTS:
A)Consolidated Report of Cash and Investments
B)Investment Portfolio, as of December 31, 1996
C)Investment Policy Compliance
PREPARED BY: Linda Craig, Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:~. ~
Em~rri~n
Deputy City Mana~ge~,
A~strative ~rv/f~es
CITY MANAGER APPROVAL:
ming" ,I’ ,~’~’ity Manager
ClVIR:122:97 Page 3 of 3
Attachment A
Consolidated Report
City of Palo Alto Cash and Investments
Second Quarter, Fiscal Year 1996-97
Book Value Market Value
City Investment Portfolio (see Attachment B)$214,359,243 $ 214,183,596
Other Funds Held by the City_
Cash with Bank of America
! 995 Utility Revenue Bond Proceeds
Fidelity Fund - Treasury Class I,
Total
$1,341,004
$ 5,785,772
$ 7,126,776
1,341,004
$5,785,772
$7,126,776
Funds Under Management of Contracted Parties
Fiscal Agent Debt Service Payments and Reserves
First Trust California
Golf Course Corporation Lease/Reserve Fund $162,832
Palo Alto Public Improvement Corporation
Lease/Reserve Fund $ 779:500
Total $ 942,332
Employee Deferred Compensation Acccounts
(September 30, 1996)
Great Western Bank
ICMA Retirement Corporation
ITT Hartford
Total
$ 802,368
$14,602,885
$23,024,720
$38,429,973
TOTAL $39r372,305
$162,832
$779,500
$942,332
$
$
802,368
14,602,885
23,024,720
38,429,973
39,372,305
12/31/1996
Attachment B /.
city of Palo Alto FI -1
Investments by Type cP~
ACCRUAL
DECEMBER 31, 1996
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
NUMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
MANAGED POOL ACCOUNTS
158 Fidelity Investments
159 Local Agency Invest. Fund
1,000,000.00 1,000,000.00 1,000,000.00 5.370 5.296 5.370
9,500,000.00 9,500,000.00 9,500,000.00 5.592 5.515 5.592
1
1
SUBTOTALS and AVERAGES 10,500,000.00 10,500,000.00 10,500,000.00 5.495 5.571
FEDERAL AGENCY ISSUES - COUPON
193 Federal Farm Credit B~nk 05/03/96 1,998,377.65 2,000,000.00 2,000,620.00 5.500 5.674 5.753 05/01/97 120
138 Federal Home Loan Bank 03/07/94 4,999,236.11 5,000,000.00 4,998,450.00 5.180 5.271 5.344 03/07/97 65
139 Federal Home Loan Bank 06/16/95 2,000,000.00 2,000,000.00 2,003,760.00 5.890 5.809 5.890 06/16/97 166
140 Federal Home Loan Bank 06/19/95 3,000,000.00 3,000,000.00 3,005,640.00 5.890 5.890 5.971 06/16/97 166
141 Federal Home Loan Bank 08/02/94 3,001,429.71 3,000,000.00 3,015,000.00 6.525 6.334 6.422 07/11/97 191
142 Federal Home Loan Bank 09/26/94 3,990,300.66 ~,000,000.00 4,023,760.00 6.530 6.839 6.934 09/02/97 244
146-Call Federal Home Loan Bank 02/18/94 2,000,000.00 2,000,000.00 1,976,880.00 5.380 5.496 5.572 12/14/98 712
147-Call Federal Home Loan Bank 02/14/94 2,000,000.00 2,000,000.00 1,976,880.00 5.380 5.496 5.572 12/14/98 712
148-Call Federal Home Loan Bank 02/09/94 2,000,000.00 2,000,000.00 1,976,880.00 5.380 5.496 5.572 12/14/98 712
149-Cali Federal Home Loan Bank 02/10/94 2,000,000.00 2,000,000.00 1,976,880.00 5.380 5.496 5.572 12/14/98 712
150-Call Federal Home Loan Bank 02/11/94 2,000,000.00 2,000,000.00 1,976,880.00 5.380 5.496 5.572 12/14/98 712
151-Step Up Federal Home Loan Bank 04/13/94 4,150,000.00 4,150,000.00 4,184,154.50 6.000 5.833 5.914 04/13/01 1,563
152-Step Up Federal Home Loan Bank 04/15/94 2,925,000.00 2,925,000.00 2,949,072.75 6.000 5.833 5.914 04/13/01 1,563
153~Step Up Federal Home Loan Bank 04/14/94 2,925,000.00 2,925,000.00 2,949,072.75 6.000 5.833 5.914 04/13/01 1,563
166 Federal Home Loan Bank I1/16/95 4,996,109.04 5,000,000.00 4,971,900.00 5.660 5.706 5.785 11/09/98 677
167-Call Federal Home Loan Bank 12/27/95 3,000,000.00 3,000,000.00 2,966,250.00 6.250 6.193 6.279 12/27/00 1,456
172 Federal Home Loan Bank 02/15/96 2,001,761.46 2,000,000.00 1,981,880.00 4.920 4.835 4.902 02/09/98 404
173 Federal Home Loan Bank 02/15/96 4,008,488.19 4,000,000.00 3,923,212.00 5.055 4.945 5.014 02/09/99 769
177-Cali Federal Home Loan Bank 02/21/96 1,550,000.00 1,550,000.00 1,519,480.50 5.965 5.965 6.048 02/21/01 1,512
179-Call Federal Home Loan Bank 02/28/96 2,000,000.00 2,000,000.00 1,955,000.00 5.860 5.860 5.941 02/28/01 1,519
187 Federal Home Loan Bank 04/23/96 2,000,000.00 2,000,000.00 2,001,260.00 6.100 6.100 6.185 04/23/99 842
188 Federal Home Loan Bank 04/23/96 2,000,000.00 2,000,000.00 2,001,260.00 6.100 6.100 6.185 04/23/99 842
189 Federal Home Loan Bank 05/06/96 2,000,000.00 2,000,000.00 2,005,620.00 6.210 6.210 6.296 05/06/99 855
202 Federal Home Loan Bank 08/09/96 4,002,049.70 4,000,000.00 4,013,760.00 6.260 6.153 6.238 08/09/99 950
203 Federal Home Loan Bank 09/27/96 3,002,994.60 3,000,000.00 3,015,000.00 6.335 6.208 6.294 09/23/99 995
205 Federal Home Loan Bank 10/25/96 2,227,613.57 2,235,000.00 2,229,412.50 6.050 6.096 6.180 10/25/99 1,027
206 Federal Home Loan Bank !1/15/96 1,155,030.19 1,150,000.00 1,155,255.50 6.030 5.780 5.860 11/08/99 1,041
207 Federal Home Loan Bank 11/15/96 2,011,661.59 2,000,000.00 1,996,880.00 6.090 5.781 5.862 11/01/99 1,034
210 Federal Home Loan Bank 12/18/96 990,152.74 990,000.00 988,455.60 6.090 5.997 6.081 11/01/99 1,034
127 Fed Home Ln Mort Corp 03/21/94 2,000,023.15 2,000,000.00 2,000,000.00 5.470 5.389 5.464 03/21/97 79
178-Cali Fed Home Ln Mort Corp 02/23/96 2,000,000.00 2,000,000.00 1,942,500.00 5.600 5.600 5.678 02/23/01 1,514
212 Fed Home Ln Mort Corp 12/18/96 1,012,274.54 1,000,000.00 1,010,310.00 6.550 6.015 6.098 01/04/00 1,098
213 Fed Home Ln Mort Corp 12/18/96 1,012,197.34 1,000,000.00 1,010,310.00 6.550 6.015 6.098 01/04/00 1,098
164 Federal Land Bank 01/20/77 500,000.00 500,000.00 500,470.00 7.350 7.249 7.350 01/20/97 19
112 Fed Nat Mortgage Assn 08/25/94 8,002,157.89 8,000,000.00 8,005,040.00 7.600 6.414 6.504 01/10/97 9
113 Fed Nat Mortgage Assn 01/12/87 2,000,007.04 2,000,000.00 2,001,260.00 7.600 7.580 7.685 01/10/97 9
114 Fed Nat Mortgage Assn 01/25/94 1,999,872.21 2,000,000.00 1,998,960.00 4.380 4.487 4.550 01/21/97 20
115 Fed Nat Mortgage Assn 04/27/95 4,001,365.81 4,000,000.00 4,014,720.00 6.770 6.547 6.638 04/14/97 103
116 Fed Nat Mortgage Assn 08/25/95 4,000,000.00 4,000,000.00 4,013,960.00 6.110 6.026 6.110 08/25/97 236
12/31/1996
Attachment B
City of Palo Alto
Investments by Type
DECEMBER 31, 1996
FI -2
CPA
ACC~U~
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
N~!MBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
FEDERAL AGENCY ISSUES - COUPON
117 Fed Nat Mortgage Assn 08/16/95 4,087,434.48 4,000,000.00
i18 Fed Nat Mortgage Assn 06/08/95 3,011,581.57 3,000,000.00
119 Fed Nat Mortgage Assn 08/15/95 4,116,721.56 4,000,000.00
120 Fed Nat Mortgage Assn 01/11/93 999,903.44 1,000,000.00
121 Fed Nat Mortgage Assn 01/11/93 1,999,806.88 2,000,000.00
122 Fed Nat Mortgage Assn 01/12/93 1,999,806.77 2,000,000.00
123 Fed Nat Mortgage Assn 10/05/95 4,000,911.58 4,000,000.00
124 Fed Nat Mortgage Assn 10/06/95 4,000,889.03 4,000,000.00
165 Fed Nat Mortgage Assn 11/15/95 5,158,686.63 5,000,000.00
168 Fed Nat Mortgage Assn 01/26/96 4,002,032.38 4,000,000.00
170 Fed Nat Mortgage Assn 01/26/96 4,412,622.80 4,000,000.00
171 Fed Nat Mortgage Assn 02/09/96 3,007,328.33 3,000,000.00
180 Fed Nat Mortgage Assn 03/07/96 2,989,311.78 3,000,000.00
181 Fed Nat Mortgage Assn 03/13/96 2,964,949.32 3,000,000.00
186 Fed Nat Mortgage Assn 04/18/96 1,987,577.67 2,000,000.00
194 Fed Nat Mortgage Assn 05/06/96 1,992,132.61 2,000,000.00
195 Fed Nat Mortgage Assn 05/06/96 1,753,868.87 1,790,000.00
196 Fed Nat Mortgage Assn 05/31/96 2,310,397.14 2,205,000.00
197 Fed Nat Mortgage Assn 05/31/96 2,095,598.31 2,000,000.00
200 Fed Nat Mortgage Assn 07/11/96 2,594,399.05 2,705,000.00
201 Fed Nat Mortgage Assn 07/11/96 2,276,892.69 2,300,000.00
204 Fed Nat Mortgage Assn 10/25/96 1,994,427.71 2,000,000.00
208-Call Fed Nat Mortgage Assn 12/23/96 2,000,000.00 2,000,000.00
209-Cali Fed Nat Mortgage Assn 12/23/96 1,000,000.00 1,000,000.00
211 Fed Nat Mortgage Assn 12/18/96 990,963.70 1,000,000.00
155 Student Loan Mktg. Assn 05/02/95 4,003,993.66 4,000,000.00
169 Student Loan Mktg. Assn 01/26/96 4,221,060.64 4,000,000.00
SUBTOTALS and AVERAGES
4,105,000.00
3,020,520.00
4,137,520.00
1,002,810.00
2,005,620.00
2,005,620.00
4,002,320.00
4,002 320.00
5,157 800.00
3,892 000.00
4,326 240.00
2,954 280.00
2,955 720.00
2,962 050.00
1,992 000.00
2,021,440.00
1,778,526.10
2,333,860.20
2,116,880.00
2,645,192.45
2,321,505.00
1,996,880.00
2,000,000.00
1,000,000.00
990,852.67
4,008,760.00
4,148,760.00
178,436,401.79177,425,000.00178,120,562.52
9.550 6.049 6.133 09/10/97 252
6.450 5.918 6.000 12/08/97 341
9.550 6.085 6.170 12/10/97 343
6.050 5.978 6.061 01/12/98 376
6.050 5.978 6.061 01/12/98 376
6.050 5.978 6.061 01/12/98 /376
5.950 5.854 5.935 09/28/98 635
5.950 5.854 5.935 09/28/98 635
9.550 5.513 5.590 11/10/97 313
5.550 5.459 5.535 01/17/01 1,477
8.900 5.415 5.490 06/12/00 1,258
5.200 5.087 5.158 01/25/99 754
5.280 5.385 5.460 03/01/99 789
5.400 5.907 5.989 03/12/99 800
5.840 6.061 6.145 03/29/99 817
6.625 6.641 6.733 04/18/01 1,568
6.160 6.631 6.723 04/03/01 1,553
8.700 6.421 6.510 06/10/99 890’
8.700 6.421 6.510 06/10/99 890
5.720 6.779 6.873 03/08/01 1,527
6.590 6.766 6.860 05/24/01 1,604
6.070 6.095 6.180 10/18/99 1,020
6.340 6.340 6.428 12/23/99 1,086
6.340 6.340 6.428 12/23/99 1,086
5.740 6.080 6.164 12/09/99 1,072
7.875 6.566 6.657 02/03/97 33
7.500 5.458 5.534 03/08/00 1,162
5.928 6.010 723
TREASURY SECURITIES - COUPON
182 U.S. Treasury 03/21/96 2,975,809.96 3,000,000.00 2,975,625.00
183 U.S. Treasury ~3/21/96 2,971,927.08 3,000,000.00 2,972,814.00
184 U.S. Treasury ~03/27/96 2,952,845.44 3,000,000.00 2,949,375.00
185 U.S. Treasury 03/27/96 2,979,559.57 3,000,000.00 2,979,375.00
190 U.S. Treasury 05/01/96 2,001,858.83 2,000,000.00 2,008,750.00
191 U.S. Treasury 05/03/96 2,001,891.43 2,000,000.00 2,008,750.00
192 U.S. Treasury 05/03/96 3,032,691.45 3,000,000.00 3,050,640.00
.198 U.S. Treasury 06/17/96 3,011,549.53 3,000,000.00 3,052,500.00
199 U.S. Treasury 07/10/96 3,013,833.59 3,000,000.00 3,060,930.00
5.250 5.792 5.873 07/31/98 576
5.125 5.797 5.877 06/30/98 545
4.750 5.697 5.776 08/31/98 607
5.125 5.634 5.712 03/31/98 454
6.125 5.967 6.050 05/15/98 499
6.125 5.966 6.049 05/15/98 499
6.750 6.158 6.244 05/31/99 880
6.750 6.486 6.576 06/30/99 910
6.875 6.581 6.672 07/31/99 941
SUBTOTALS and AVERAGES 24,941,966.88 25,000,000.00 25,058,759.00 6.014 6.098 670
GINNIE MAE’S
161 Fed Home Ln Mort Corp 07/05/83 44,312.44 43,231.65 42,907.41 12.450 11.875 12.039 09/15/09 4,640
12/31/1996
Attachment B
city of Palo Alto FI -3
Investments by Type CPA
ACCRUAL
DECEMBER 31, 1996
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
NUMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
GINNIE MAE’S
162 Fed Home Ln Mort Corp 02/16/79
160 Govt. Natl. Mortgage Assn 01/26/87
I06,462.39 108,335.70 117,786.91 i0.000 10.120 10.261 02/01/09 4,414
330,099.59 320,193.60 343,580.60 9.000 8.449 8.566 11/15/16 7,258
SUBTOTALS and AVERAGES
TOTAL INVESTMENTS and AVERAGES
480,874.42 471,760.95 504,274~92 9.134 9.261 6,387
213,396,760.95 "
214,359,243.09 214,183,596.44 5.924%6.006%694
====================================================================================
Attachment C
Investment Policy Compliance
as of December 31, 1996
No more than 10 percent of the portfolio in collateralized Certificates of 0.00%
Deposit (CDs) of any institution.
No more than 30 percent of the portfolio in Banker’s Acceptance Notes.0.00%
- No more than $5 million with any one institution,n/a
No more than 15’percent of the portfolio in Commercial Paper.0.00%
-No more than $3 million with any one institution,n/a
Limit investments exclusively to those stipulated under types of investment.No exceptions
No more than 10 percent of the portfolio in Farm Credit Securities..97%
No more than 2 percent of the portfolio in the Guaranteed Portion of Small 0.00%
Business Administration Notes.
No more than 15 percent of portfolio in Mutual Funds..47%
No more than 20 percent of portfolio in callable or Multi-Step-up 14.8%
government agency securities.
Liquidity enough to meet one month’s cash needs.$39.3 million
At least $50 million maturing in less than 2 years.$118 million
No more than 20 percent of the portfolio shall be in investments maturing in .22%
more than five years.
Market value of the portfolio will exceed 95 percent of the amortized cost 99.9%
basis of the portfolio. ¯
a:inveompl