HomeMy WebLinkAbout1997-04-24 City Council (9)City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
APRIL 24, 1997 CMR:217:97
CITY OF PALO ALTO’S INVESTMENT ACTIVITY REPORT
FOR THE THIRD QUARTER, FISCAL YEAR 1996-97
REOUEST:
The purpose of this report is to inform Council on the status of the City’s investment-
portfolio as of the third quarter of the 1996-97 fiscal year.
RECOMMENDATIONS:
This is an informational report and no Council action is required.
~---/ "----IMP I--_- ::-- .:
This report does not propose any changes to existing City policies.
EXECUTIVE SUMMARY
Current Investment Portfolio as of March 3!, 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 March 31, 1997.
The face value of the City’s portfolio is $216.1 million, which consists of $109.5 million, or
50.7 percent, maturing in less than two years. Most of the investments, $205.6 million, or
95 percent, are in United States governmental securities. The current market value of the
CMR:217:97 Page I of 4
portfolio is 99.03 percent of the book value and the average life is 2.16 years. The market
valuation is provided by Union Bank of California, which is the City’s safekeeping agent.
Investments Made During the Third Quarter
During the third q ~uarter of the fiscal year, the portfolio grew by $2.7 million. Staff replaced
$23.5 million in maturing U. S. Government agency notes, having an average yield of 6.15
percent with $26.3 million in U. S. Government agency notes having an average yield to
maturity of 6.44 percent. Of the new investments, $14 million were placed in a five year-
term, and this longer term contributed to the higher yield. Funds held in short-term money
market funds did not change during the quarter, and remained at a total of $10.5 million.
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 $106 million and expenditures will be
$97 million over the next six months, indicating an overall growth of the portfolio of about
$9 million. In addition, securities totaling $36 million will mature or be called between April
1997 and September 1997. $10.5 million is als~ available in funds which can be withdrawn
on a daily basis from the City’s investments in the Local Agency Investment Funds (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.
Compliance with City_ Investment Policy
During the third 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 nine months of the 1996~97 fiscal year, interest totaled $9.5 million, or 81.3. percent.
of the 1996-97 budget for interest earnings of $11.7 million. Projected portfolio earnings for
year are $12.7 million. The current effective rate of return for the fiscal year is 6.04 percent.
This compares to Local Agency Investment Fund’s yield for the quarter of 5.58 percent, and
the current yield on the two-year Treasury note of 6.41 percent.
¯Given the growth in the size of the investment portfolio, staffplans to evaluate the amount
of City funds held in longer term reserves and funded liabilities, such as the Calaveras
Reserve in the Electric Fund and the Refuse Fund Post-Closure Reserve, 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 greater than five years, yet only $413,000 was
CMR:217:97 Page 2 of 4
invested in a greater than five-year term as of March 31, 1996. Staff will report back to
Council on the outcome of this evaluation in the annual review of the City investment policy
that will be presented with the 1997-98 Proposed Budget.
Yield Trends
On March 25, 1997, the Federal Reserve Open Market Committee (FOMC) increased the
federal funds rate, the rate which is charged on overnight loans between banks, by 25 basis
points from 5.25 percent to 5.50 percent. This was to "pre-empt" inflationary pressures
resulting from the continuing economic growth. The FOMC said the increase was viewed as
a prudent step that affords greater assurance of prolonging the current economic expansion
by sustaining the existing low inflation environment. The 30-year Treasury bond dosed the
month of March at yield of 7.09 percent, and the two-year Treasury bond reached a yield of
6.41 percent, its highest level since September, 1996.
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 Bank of America checking account,
bond proceeds Which the City itself manages in a separate investment account, bond reserves
being held by the City’s fiscal agents, and employee deferred compensation accounts, whose
investment is directed by the individual employee but which are technically considered City
funds, reserved for the employees. The most recent data on the funds held by the fiscal agent
is as of March 31, 1997, while the balances in the deferred compensation accounts are as of
December 31, 1996.
This is an informational report with no fiscal impact resulting.
ENVIR~ ASSESSMENT:
There is no environmental assessment required for this report.
A)Consolidated Report of Cash and Investments
B)Investment Portfolio, as of March 31, 1997
C)Investment Policy Compliance
CMR:217:97 Page 3 of 4
PREPARED BY: Linda Craig, Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
Emily
Assistant City Manager
cc:n/a
CMR:217:97 Page 4 of 4
Attachment A
Consolidated Report
City. of Palo Alto Cash and Investments
Third Quarter, Fiscal Year 1996-97
Book Value Market Value
City. Investment Portfolio (see Attachment B)$ 214.992.411
Other .Funds Held by the ~
Cash with Bank of America
1995 Utility Revenue Bond Proceeds
Fidelity Fund - Treasury Class I
Total
$1,875,436
$ 7.735.593
1,875,436
$ 7.735.593
nF_u_n_d_s~nder Management of Contracted Parties
First Trust California
Golf Course Corporation Lease/Reserve Fund
Palo Alto Public Improvement Corporation
Lease/Reserve Fund
Total
$162,997
$ 936,248
Employee Deferred Compensation Accounts
(December 31, 1996)
Great Western Bank
ICMA Retirement Corporation
ITT Hartford
Total
$ 794,385
$15,002,240
$162,997
$ 936,248
$ 794,385
15,002,240
TOTAL
0~/15/1997
Investments by Type
City of Palo Alto
MARCH 31, 1997
ATTACHMENT B
FI -1
CPA
ACCRUAL
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
3,000,000.00 3,000,000.00 3,000,000.00 5.190 5.119 5.190
7,500,000.00 7,500,000.00 7,500,000.00 5.580 5.504 5.580
1
1
SUBTOTALS and AVERAGES I0,5~0,000.00 10,500,000.00 10,500,000.00 5.394 5.469
FEDERAL A~ENCY ISSUES - COUPON
193
221
222
139
140
141
142
146-Cali
147-Ca11
148-Ca11
149-Cali
150-Call
151-Step Up
152-Step Up
153-Step Up
166
167-Cali
172
173
.177-Cali
179-Cali
187
188
189
202
203
205
206
207
210
215
216
178-Cali
212
213
217
218
118
116
F~deral Farm credit Bank
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 Hom~"Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal Home Loan Bank
Federal HomeLoan 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 orp
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Fed Home LnMort Corp.
Fed Nat Mortgage Assn’
Fed Nat Mortgage Assn
05/03/96 1,999,594.41
02/04/97 1,096,172.06
02/04/97 898,502.11
06/16/95 2,000,000.00
06/19/95 3,000,000.00
08/02/94 3,000,752.48
09/26/94 3,993,922.82
02/18/94 2,000,000.00
02/14/94 2,000,000.00
02/09/94 2,000,000.00
02/10/94 2,000,000.00
02/11/94 2,000,000.00;
04/13/94 4,150,000.00
04/15/94 2,925,000.00
04/14/94 2,925,000.00
11/16/95 4,996,633.27
12/27/95 3,000,000.00
02/15/96 2,001,363.14
.02/15/96"4,007,480.36
02/21/96 1,550,000.00
02/28/96 2,000,000.00
04/23/~6 .2,000,000.00
04/23/96 2,000,000.00
05/06/96.2,000,000.00
08/09/96 4,001,853.04
09/27/96 3,002,720.14
10/25/96 2,228,269.17
11/15/96 1,154,589.38
11/15/96 2,010,632.62
12/18/96 990,139.27
01/28/97 999,821.08
01/28/97 1,998,381.51
02/23/96 2,000,000.00
12/18/96 1,011,254~50
01/10/97 ’1,356~2~9.81
01/10/97 3,014,321.99
04/27/95 4,000,172.38
08/25/95 4,000,000.00
2,000,000.00
1,100,000.00
900,000.0b
2,000,000.00
3,000,000.~b
3,000,000.00
4;000,000.00
.2,000,000.00
~,000,~00.00
2,000,000.00
2,000,000.00
2,000,000.00
4,150,000.00
2,925,000.00
2,925,000.00
5,000,000.00
3~000,000.00
2~000,000.00
4,000,000.00
1,550,000.00
2,000,000.00
2,000,000.00
2,000,000.00
2,.000,000.00
4,000,000.00
3,000,000.00
2,235,000.00
1,150,000.00
2,000,000,00
990,000.00
1,000,000.00
2,000,000.00
2,000,000.00
I~000,000.00
!,000,000.00
1,285,000.00
3,000,000.00
4,000,000.00
4,000,000.00
1,999,680.00
1,074~,733.00
. 879,327.00
2,000,620.00
3,000,930.00
3,005,610.00
4,010,000.00
1,966,240.00
1,966,240.00
1,966,240.00
1,966,240.00
1,966,240.00
4,148,008.00
2,923,596.00
2,923,5~6.00
4,938,300.00
2,927,820.00
1,978,740.00
3,898~760.00
1,500,586.00
1,929,680.00
1,980,620.00
1,980,620.00
1,984,380.00
3,967,480.00
2,979,360.00
2,204,961.60
1,136,430.00
1,973,760.00
977,011.20
988,120.00
1,976 240.’00
1,914 680.00
995 940.00
995 940.00
.1,331 182.90
2,950 320.00
4,001 480.00
4,005 640.00
5.500
6.420
6.420
5.890
5.890
6.525
6.530
5.380
5.380
5.~eo
5.380
5.380
6.000
6.000
6.000
5.660
6.250
4.920
5.055
5.965
5.860
6.100
6~I00
6.210
6.260
6.335
6.050
6.030
6.090"
6.090
6.173
6.173
5.600
6.550
6.550
7.900
6.520
6.770
6.110
5.674 5.753 05/01/97 30
6.416 6~505 02/04/02 1,770
6.372 6.461 02/04/02 1,770
5.809 5.890 06/16/97 76
5.890 5.971 06/16/97 76
6.334 6.422 07/11/97 i01
6.839 6.934 09/02/97 164
5.496 5.572 12/14/98 622
5.496 5.5~2 12/14/98 622
5.496 5.572 12/14/98 622
5.496 5.572 12/14/98 622
5.496 5.572 12/14/98 622
5.833 5.914 04/13/01 1,473
~.833 6~914 04/13/01 1,473
5.833 5.914 04/13/01 1,473
5.706 5.785 11/09/98 587
6.193 6.279 i2/27/00 1,366
4~835 4.902 02/09/98 314
4.945 5.014 02/09/99 679
5.965 6.048 02/21/01 1,422
5.860 6.941 02/28/01 1,429
6.100 6.185 04/23/99 752
6.100 6.185 04/23~99 752
6.210 6.296 05/06/99 765
6,153 6.238 08/09/99 860
6.208 6.294 09/23/99 905
6.096 6.180 I0/25/99 937
5.780 5.860 11/08/99 951
5.701 5.862 11/01/99 944
5.997 6.081 11/01/99 944
6.086 6.180 01/28/00 1,032
6.120 6.205 0~128100 z,032
5.600 5.678 02/23/01 1,424
6.015 ¯6.098 01/04/00 1,008
6.015 6.098 01/04/00 1,008
6.352 6.440 09/19/01 1,632
6.313 6.401 01/02/02 1,737
6.547 6.638 04/14/97 13
6.026 6.110"08/25/97 146
~Investments by Type
04/15/1997 City of Palo Alto
MARCH 31, 1997
ATTACHMENT B
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
FEDERAL AGENCY ISSUES - COUPON
117
118
119
120
121
122
123
124
165
168
170
171
180
181
186
194
195"
196
197
200
201
204
208-Call
209-Cali
211
214-Cali
219
220
223
224
225
226
227
169
Fed Nat Mortgage Assh
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed NatMortgageAssn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Na~’Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
Student Loan Mktg. ~msn
o8/16/95
06108195
08115195
Ol/11/93
01111193
Ol/12193
10105195
1~/o6/95
11/15/95
Ol/26/96
Ol/26/96
o2/o9/96
o3/o7/96
o3/13/96
o4/18/96
o5/o6/96
o5/o6/96
o5/31/96
o5/31/96
o7/11/96
o7/11/96
lO/25/96
12/23/96
12/23/96
12/18/96
Ol/14/97
Ol/13/97
o2/o3/97
o3/o7/97
o3/07/97
o3/o7/97
o3/21/97
o3/21/97
Ol/26/96
4,.055,831.65
3,008,488.57
4,085,733.53
999,926.86
1,999,853.73
1,999,853.65
4,000,780.73
4,000,761.42
5,112,467.22
4,001,906~q6
4,382,698.50
3,006,441.84
2,~90,545.03
4,000,000.00
3,000,000.00
4,000,000.00
1,000,000.00
2,000,000.00
2,000,000.00
4,000,000.00
4,060 000.00
3,011 280.00
4,096 240.00
1,000 160.00
2,000 320.00
2,000320.00
3,975.000.00
4,000,000.00 3,975.000.00
5,000,000.00 5,101 550.00
4,000,000.00 3,796 240.00
4,000,000.00 4,240 000.00
3,000,000.00 2,932 980.00
~,000,000.00 2,933 910.00
2,968,937.38 ..3,000,000.00 2,933
1,988,961.34 2,000,000.00 1,972
-’~,:992",590,31 2,000,000.00 1,981
1,755,991.45 1,790,000.00 1,747
2,299,605.62-2,205,000.00 2,284
2,085;810.09 2,000,000.00 2,071
’2,601,004.28 2,705,000.00 2,596
2,278,20~.4~’12,300,000.00 2,274
1,994,925.73 2,000,000~00 1,973
2,000,000.00 2,000,000.00 1,977
1,000,000.00 1,000,000.00 988
991,732.39 1,000,000.00 977
~3,000,000.00 3,000,000.00 2,972
2,002,979.69 2,000,000.00 i,971
4,168,781.11 4,000,000.00 4,095
1,973,506.84 2,000,000.00 1,947
1,479,535.30 i,500,000.00 1,460
1,480,344.64 "I,500,000.00 1,460
1,492,807.28 1,500,000.00 1,483
1,492,569.51 1,500,000.00 1,483
4,203,715.0~4,000,000.00 4,077
430.00
180.00
240.00
201.10
,247.70
,880.00
,367.20
.493.00
.740.00
.820.00
.910.00
.810~00
820.00
880.00
000.00
180,00
385.00
385.00
125.00
125.00
480.00
9.550 6.049
6.450 5.918
9.550 6.085
6.050 5.97~
6.050 5.978
6.050 5.978
5.950 5.854
5.950 5.854
9.550 5.513
5.550 5.459
8.900 5.415
5.200 5.087
5.280 5.385
5.400 5.907
5.840 6.061
6.625 6.641~
6.160 6.631
8.700 6.421
8.700 6.421
5.720 6.779
6.590 6.766
6.070 6.095
6.340 6,340
6.340 6.340
5.740 6.080
6.470 6.381
6.580 6.447
7.500 6.381
6.230 6.460
6.230 6.470
6.230 6.457
6.250 6.342
6.250 6.348
7.500 5.458
6.133
6.000
6.170
6.061
6.061
6.061
5.935
5.935
5.590
5.535
5.490
5.158
5.460
5.989
6.145
6.733
6.723
6.510
6.510
6.873
6.860
6.180
6.428
6.428
6.164
6.470
6.537
6.470
6.550
6.560
6.547
6.430
6.436
5.534
09/10/97 162
12/08/97 251
12/10/97 253
01/12/98 286
01/12/98 286
01/12/98 286
09/28/98 545
09/28/98 545
11/10/97 223
01/17/01 1,387
06/12/00 1,168
01/25/99 .664
03/01/99 699
03/12/99 710
03129199 727
04/18/01 1,478
04/03/01 1,463
06/10/99 800
06110199 800
03/08/01 1,437
05/24/01 1,51~
10/18/99 930
12/23/99 996
12/09/99 982
01/14/00 1,018
10/02/01 1,645
02/11/02 1,777
03/01/02 1,795
03/01/02 1,795
03/01/02 1,795
03/20/00 1,084
03/20/00 1,084.
o31o8/oo 1,o72
SUBTOTALS and AVERAGES ’181,221,353.13180,210,000.00179,169,050.70 5.973 6.056 851
TREASURY SECURITIES - COUPON
182 U.S. Treasury
183 U.S. Treasury
184 U.S. Treasury
185 U.S. Treasury
190 U.S. Treasury
191 U.S. Treasury
192 U.S. Treasury
03/21/96
03/21/96
03/27/96
03/27/96
os/o1/96
05103/96
o51o3/96
2,979,636.15 3,000,000.00 2,962,020.00
2,976,614.58 3,000,000.00 2,961,570.00
2,959,837.06 3,000,~00.00 2,938,590.00
2,983,611.63 3,00~,000.00 2,972,820.00
~2,001,523.57 2,000,000.00 1,999,060.00
2,001,550.29 2,000,000.00 1,999,060.00
3,029,348.01 3,000,000.00 3,015,000.00
5.250
5.125
4.75’0
5.125
6.125
6.125
6.750
5.792
5.797
5.697
5.634
5.967
5.966
6.158
5.873
5.877
5.776
5.712
6.050
6.049
6.244
07131198 486
06/30/98 455
08131198 517
03/31/98 364
os/zs/98 409
o~115198 409
05/31/99 790
04/1s/1997
Investments by Type
City of Palo Alto
MARCH 31, 1997
ATTACHMENT B
FI-3
CPA
ACCRUAL
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
NUMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MA~
TREASURY SECURITIES - COUPON
198 U.S. Treasury 06/17/~6 3,010,407.27 3,000,000.00 3,015,480.00 6.750 6.486 6.576 06/30/99 82C
199 U.S. Treasury 07/10/96 3,012,510.50 3,000,000.00 3,022,500.00 6.875 6.581 6.672 07/31/99 85~
SUBTOTALS and AVERAGES 24,955,039.06 25,000,000.00 24,886,100.00
GINNIE MAE’S
161 ?ed Home Ln Mort Corp 07/05/83
162 Fed Home LnMort Corp 02/16/79
160 Govt. Natl. Mortgage Assn 01/26/87
SUBTOTALS and AVERAGES
TOTAL INVESTMENTS and AVERAGES
6.014 6.097 58C
~44,312.44 43,231.65 41~880.66 12.450 11.875 12.039 09/15/09 4,550
101.380.86 103,164.75 112,078.18 i0.000 10.120 10.261 02/01/09 4,324
274,707.52 266,463.80 283,301.71 9.000 8.449 .8.566 11/15/16 7,168
420,400.82 412,860.20 437,260.55 9.213 9.341 6,206
216,122,860.20
217,096,793.01 214,992,411.25 5.956% 6.039%789
Attachment C
Investment Policy Compliance
as of March 31, 1997
No more ~an 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 21percent of the portfolio in the Guaranteed Portion of Small
Business Administration Notes.
No more than 15 percent of portfolio in Mutual Funds.
No more than 20 percent of portfolio in callable or.Multi-Step-up
government agency securities.
Liquidity enough to meet one month’s cash needs.
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.
Market value 0fthe portfolio will exceed 95 percent of the amortized cost
basis of the’poi’tfolio..
0.00%
0.00%
n/a
0.00%
n/a
No exceptions
1.85%
0.00% -
1.39%
15.99%
$24.5 million
$109.5 million
.19%
99.03%
a:invcompl