HomeMy WebLinkAbout1997-07-24 City Council (7)City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:JULY 24, 1997 CMR:343:97
SUBJECT:CITY OF PALO ALTO’S INVESTMENT ACTIVITY REPORT
FOR THE FOURTH QUARTER, FISCAL YEAR 1996-97
REQUEST:
This summarizes the status of the City’s investment portfolio as of the fourth quarter of the
1996-97 fiscal year. This is an informational report and no Council action is required.
POLICY IMPLICATIONS:
This report does not propose any changes to existing City policies.
E IVE S MARY
Current Investment Portfolio as of June 30. 1997
The City’s investment portfolio is detailed in Attachment B. The portfolio is grouped by
investment type and includes for each investment the 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 June 30, 1997.
The face value of the City’s portfolio is $222.6 million, which consists of $115 million, or
52 percent, maturing in.less than two years. Most of the investments, $211.6 million, or 95
percent, are in United States government securities. The current market value of the portfolio
is 99.8 percent of the book value and the average life is 2.23 years. The market valuation is
provided by Union Bank of California, which is the City’s safekeeping agent.
CMR:343:97 Page 1 of 4
Investment Portfolio Summary_ for 1996-97
The total value of the investment portfolio has grown during this fiscal year by $19.2 million.
This increase is consistent with recent years’ experience, reflecting savings in operating
budgets, budgeted increases in reserves, incomplete capital projects and increased revenues.
The average length of the portfolio increased from 2.01 years at the beginning of the year to
2.23 years at the end. This is a result of extendin’g the term of many new investments to a
¯ length of five years. With the overall growth in the portfolio, the City has been able to
maintain adequate cash for shorter and intermediate needs, and still place slightly longer term
investments, which have higher yields. This practice is consistent with the direction Council
approved in the recent update to the City Investment Policy. In the last few years, several
City reserves have been established for long term needs and planning. After taking care of
immediate cash flow needs, it is appropriate to attempt to match the term of new investments
with the needs and liabilities that will be funded in the future.
The City’s portfolio yield showed an increase during the year, up from 5.93 percent as of
July 1, 1996 to 6.13 percent as of June 30, 1997. This yield was achieved by purchasing new
investments with a three- to five-year term which have a higher yield than the average yield
of the portfolio, and by a rise in the overall yields in 1996-97 compared to the previous fiscal
year. The current average rate of return for the entire fiscal year is 5.99 percent. This
compares to Local Agency Investment Fund’s average annual yield of 5.59 percent, and the
average annual yield on the two-year Treasury note of 6.08 percent.
Fourth O_uarter Results
During the fourth quarter of the fiscal year, the portfolio grew by $6.5 million. $27 million
was invested in U. S. agency securities with an average yield of 6.75 percent. This included
$21 million in maturing U. S. Agency notes, which had yields of approximately 5.99 percent
and the increase in the portfolio of $6.5 million.
Interest income on an accrual basis for the fourth quarter of 1996-97 was $3.4 million. For
the 1996-97 fiscal year, interest totaled $12.9 million, or $1.2 million more than the 1996-97
budget of $11.7 million.
The Federal Reserve Open Market Committee (FOMC) increased the Federal funds rate by
25 basis points (one quat~_er of a percent) to 5.50 percent on March 25, 1997. This move was
designed to pre-empt inflationary pressures resulting from continued economic growth. The
discount rate remained at 5.00 percent, where it has been since early 1996.
The benchmark 30-year Treasury bond yield began the year above the 7 percent level,
dropped into the mid-6 percent range and rose to a peak of 7.12 percent in April 1997. As
of June 30, 1997, the yield on the 30-year Treasury bond had dropped to 6.74 percent. At
CMR:343:97 Page 2 of 4
this point, analysts do not anticipate any change in the discount rate or Federal funds rate by
the FOMC in the near future.
Availability_ of Funds for the Next Six Months
The normal flow of revenues from the City’s utility billings, tax receipts and general user
fees is sufficient to provide funds for ongoing expenditures. Projections indicate receipts
will be $108 million and expenditures will be $103 million over the next six months. In
addition, securities totaling $27 million will mature between July and December, 1997. $11
million is also 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 four~ quarter of fiscal year 1996-97, staff complied with all aspects of the
investment policy. Investments in callable securities remain slightly below the maximum
permitted under the policy. Attachment C lists the different restrictions in the City’s
Investment Policy compared with the portfolio’s actual compliance.
FIS ALIMP T:
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 June 30, 1997
C)Investment Policy Compliance
ClVIR:343:97 Page 3 of 4
PREPARED BY: Linda Craig, Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:
Meliss~ O. Cavallo,
Acting Director,
Administrative Services
CITY MANAGER APPROVAL:
CC: n/a
Manager
CMR:343:97 Page 4 of 4
Attachment A
Consolidated Report
City of Palo Alto Cash and Investments
Fourth Quarter, Fiscal Year 1996-97
City. Investment Portfolio (see Attachment B)
Book Value
$223,326,397
Market Value
$ 222,910,585
Other Funds Held by the City_
Cash with Bank of America
1995 Utility Revenue Bond Proceeds
Fidelity Fund - Treasury Class I
Total
$2,874,864
$ 7,114,590
$2,874,864
$ 4,239,726
$ 7,114,590
Funds Under Management of Contracted Parties
Fiscal Agent Debt Service Payments and Reserves"
First Trust California
Golf Course Corporation Lease/Reserve Fund $162,997
Palo Alto Public Improvement Corporation
Lease/Reserve Fund ’$ 776.512
Total $ 939,509
Employee Deferred Compensation Accounts
(March 31, 1997)
Great Western Bank
ICMA Retirement Corporation
ITT Hartford
_- Total
$ 774,608
$15,798,245
$23,895,365
$ 162,997
$776.512
$939,509
$ 774,608
15,798,245
23,895.365
TOTAL $40,688,340 $ 40,688,340
Attachment B
07/11/1997 City of Palo Alto FI -1
Investments by Type CPA
ACCRUAL
JUNE 30, 1997
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 1,000,090.00 1,000,000.00 5.310 5.237 5.310 1
i0,000,000.00 i0,000,000.00 i0,000,000.00 5.637 5.560 5.637 1
SUBTOTALS and AVERAGES ii,000,000.00 11,000,000.00 11,000,000.00 5.530 5.607
FEDERAL AGENCY ISSUES - COUPON
221
222
-- 141
142
146-Cali
147-Cali
148-Cali
149-Cali
150-Call
166
167-Cali
172
173
177-Cali
179-Cali
187
188
189
202
203
205
206
207
210
215
216
228
238
178-Call
212
213
217
218
229
230
231
116
117
118
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
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
Fed Nat Mortgage Assn
Fed Nat Mortgage Assn
02/04/97
02104197
08102194
09126194
02118194
02114194
02109194
02/10/94
o2/11/94
11/16195
12127195
02115196
o2/15/96
02121196
02128196
04123196
04123196
05/06196
08/09/96
09/27196
lO/25/96
11/15/96
11/15/96
12/18198
01128197
o1128/97
04117197
o5/25/97
o2/23/96
12/18/96
Ol/lO/97
Ol/lO/97
o4/14/97
q4/16/97
D4/14/97
o8/25/95
o8/16/95
o~/o8/95
1,096,369.72 1,100,000.00 1,093,125.00 6.420 6.416
898,579.46 900,000.00 894,3~5.00 6.420 6.372
3,000,075.25 3,000,000.00 3,000,480.00 6.525 6.334
3,997,544.98 4,000,000.00 4,006,240.00 6.530 6.839
2,000,000.00 2,000,000.00 1,981,880.00 5.380 5.496
2,000,000.00 2,000,000.00 1,981,880.00 5.380 5.496
2,000,000.00 2,000,000.00 1,981,880.00 5.380 5.496
2,000,000.00 2,000,000.00 1,981,880.00 5.380 5.496
2,000,000.00 2,000,000.00 1,981,880.00 5.380 5.496
4,997,157.50 5,000,000.00 4,974,200.00 5.660 5.706
3,000,000.00 3,000,000.00 2,961,090.00 6.250 6.193
2,000,964.82 2,000,000.00 1,989,380.00 4.920 4.835
4,006,472.52 4,000,000.00 3,935,000.00 5.055 4.945
1,550,000.00 1,550,000.00 1,519,728.50 5.965 5.965
2,000,000.00 2,000,000.00 1,955,320.00 5.860 5.860
2,000,000.00 2,000,000.00 1,998,120.00 6.100 6.100
2,000,000.00 2,000,000.00 1,998,120.00 6.100 6.100
2,000,000.00 2,000~000.00 1,999,680.00 6.210 6.210
4,001,656.37 4,000,000.00 3,986,880.00 6.260 6.153
3,002,445.69 3,000,000.00 3,006,570.00 6.335 6.208
2,228,924.77 2,235,000.00 2,226,976.35 6.050 6.096
1,154,148.56 1,150,000.00 1,146,205.00 6.030 5.780
2,009,603.66 2,000,000.00 1,992,500.00 6.090 5.781
990,125.79 990,000.00 986,287.50 6.090 5.997 .
999,836.92 1,000,000.00 998,440.00 6.173 6.096
1,998,524.74 2,000,000.00 1,996,880.00 6.173 6.120
2,993,450.52 3,000,000.00 3,025,320.00 6.670 6.665-
2,995,325.52 3,000,000.00 2,985,000.00 6.400 6.349
2,000,000.00 2,000,000.00 1,941,880.00 5.600 5.600
1,010,234.45 1,000,000.00 1,005,620.00 6.550 6.015
1,010,170.08 1,000,000.00 1,005,620.00 6.550 6.015
1,352,309.15 1,285,000.00 1,348,247.70 7.900 6.352
3,013,560.27 3,000,000.00 2,998,590.00 6.520 6.313
1,985,643.10 2,000,000.00 2,020,320.00 6.780 6.865
2,984,277.34 3,000,000.00 3,036,570.00 6.830 6.866
1,985,194.44 2,000,000.00 2,020,320.00 6.780 6.871
4,000,000.00 4,000,000.00 4,003,760.00 6.110 6.026
4,024,228.83 4,000,000.00 4,023,760.00 9.550 6.049
3,005,395.57 3,000,000.00 3,010,260.00 6.450 5.918
6.505 02/04/02 1,679
6.461 02/04/02 1,679
6.422 07/11/97 I0
6.934 09/02/97 63
5.572 12/14/98 531
5.572 12/14/98 531
5.572 12/14/98 531
5.572 12/14/98 531
5.572 12/14/98 531
5.785 11/09/98 496
6.279 12/27/00 1,275
4.902 02/09/98 223
5.014 02/09/99 588
6.048 02/21/01 1,331
5.941 02/28/01 1,338
6.185 04/23/99 661
6.185 04/23/99 661
6.296 05/06/99 674
6.238 08/09/99 769
6.294 09/23/99 814
6.180 10/25/99 846
5.860 11/08/99 860
5.862 11/01/99 853
6.081 11/01/99 853
6.180 01/28/00 941
6.205 01/28/00 941
6.758 --04/17/00 1,021
6.437 06/26/02 1,821
5.678 02/23/01 1,333
6.098-01/04/00 917
6.098 01/04/00 917
6.44~09/19/01 1,541
6.401 01/02102 1,846
6.960 04/10/02 1,744
6.961 04/16/02 1,750
6.966 04/10/02 1,744
6.110 00/25/97 55
6.133 09/10/97 71
6.000 12/08/97 160
07/11/1997 City of Palo Alto FI -2
CPAInvestments by Type ACCRU~
JUNE 30, 1997
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 ,
119 Fed Nat Mortgage Assn 08/15/95 4,054,745.51 4,000,000.00 4,068,760.00 9.550 6.085 6.170 12/10/97 162
120 Fed Nat Mortgage Assn 01/11/93 999,950.29 1,000,000.00 1,002,190.00 6.050 5.978 6.061 01/12/98 195
121 Fed Nat Mortgage Assn 01/11/93 1,999,900.58 2,000,000.00 2,004,380.00 6.050 5.978 6.061 01/12/98 195
122 Fed Nat Mortgage Assn 01/12/93 1,999,900.52 2,000,000.00 2,004,380.00 6.050 5.978 6.061 01/12/98 195
123 Fed Nat Mortgage Assn 10/05/95 4,000,649.88 4,000,000.00 3,997,480.00 5.950 5.854 5.935 09/28/98 454
124 Fed Nat Mortgage Assn 10/06/95 4,000,633.81 4,000,000.00 3,997,480.00 .5.950 5.854 5.935 09/28/98 454
165 Fed Nat Mortgage Assn 11/15/95 5,066,247.81 5,000,000.00 5,067,200.00 9.550 5.513 5..590 11/10/97 132
168 Fed Nat Mortgage Assn 01/26/96 4,001,781.13 4,000,000.00 3,855,640.00 5.550 5.459 5.535 01/17/01 1,296
170 Fed Nat Mortgage Assn 01/26/96 4,352,774.21 4,000,000.00 4,268,120.00 8.900 5.415 5.490 06/12/00 1,077
171 Fed Nat Mortgage Assn 02/09/96 3,005,555.35 3,000,000.00 2,958,750.00 5.200 5.087 5.158 01/25/99 573
180 Fed Nat Mortgage Assn 03/07/96 2,991,778.29 3,000,000.00 2,960,160.00 5.280 5.385 5.460 03/01/99 608
181 Fed Nat Mortgage Assn 03/13/96 2,972,925.45 3,000,000.00 2,960,160.00 5.400 5.907 5.989 03/12/99 619
186 Fed Nat Mortgage Assn 04/18/96 1,990,345.02 2,000,.000.00 1,988,120.00 5.840 6.061 6.145 03/29/99 ~36
194 Fed Nat Mortgage Assn 05/06/96 1,993,048.01 2,000,000.00 2,008,440.00 6.625 6.641 6.733 04/18/01 1,387
195 Fed Nat Mortgage Assn ~ 05/06/96 1,758,114.04 1,790,000.00 1,773,496.20 6.160 6.631 6.723 04/03/01 1,372
196 Fed Nat Mortgage Assn 05/31/96 2,288,814.11 2,205,000.00 2,303,541.45 8.700 6.421 6.510 06/I0/99~ 709
197 Fed Nat Mortgage Assn 05/31/96 2,076,021.87 2,000,000.00 2,089,380.00 8.700 6.421 6.510 06/10/99 709
200 Fed Nat Mortgage Assn 07/11/96 2,607,609.52 2;705,000.00 2,636,942.20 5.720 6.779 6.873 03/08/01 1,346
201 Fed Nat Mortgage Assn 07/11/96 2,279,520.18 2,300,000.00 2,307,544.00 6.590 6.766 6.860 05/24/01 1,423
204 Fed Nat Mortgage Assn 10/25/96 1,995,423.75 2,000,000.00 1,993,740.00 6.070 6.095 6.180 10/18/99 839
208-Cali Fed Nat Mortgage Assn 12/23/96 2,000,000.00 2,000,000.00 1,993,440.00 6.340 6.340 6.428 12/23/99 905
209-Cali Fed Nat Mortgage Assn 12/23/96 1,000,000.00 1,000,000.00 996,720.00 6.340 6.340 6.428 12/23/99 905
211 Fed Nat Mortgage Assn i2/18/96 992,501.07 1,000,000.00 988,750.00 5.740 6.080 6.164 12/09/99 891
214-Ca11 Fed Nat Mortgage Assn 01/14/97 3,000,000.00 3,000.,’000.00 2,994,840.00 6.470 6.381 6.470 01/14/00 927
219 Fed Nat Mortgage Assn 01/13/97 2,002,815.99 2,000,000.00 2,002,180.00 6.580 6.447 6.537 10/02/01 1,554
220 Fed Nat Mortgage Assn 02/03/97 4,160,100.94 4,000,000.00 4,153,760.00 7.500 6.381 6.470 02/11/02 1,686
223 Fed Nat Mortgage Assn 03/07/97 1,974,853.95 2,00~,000.00 1,978,440.00 6.230 6.460 6.550 03/01/02 1,704
224 Fed Nat Mortgage Assn 03/07/97 1,480,575.88 1,500,000.00 1,483,830.00 6.230 6.470 6.560 03/01/02 1,704
225 Fed Nat Mortgage Assn 03/07/97 1,481,344.07 1,500,000.00 1,483,830.00 6.230 6.457 6.547 03/01/02 1,704
226 Fed Nat Mortgage Assn 03/21/97 1,493,412.85 1,500,000.00 1,498,830.00 6.250 6.342 6.430 03/20/00 993
227 Fed Nat Mortgage Assn 03/21/97 1,493,195.09 1,500,000.00 1,498,830.00 6.250 6.348 6.43.6 03/20/q0 993
232-Cali Fed Nat Mortgage Assn 04/14/97 1,961,977.94 2,000,000.00 1,991,240.00 6.630 7.042 7.140 D2/04/02 1,679
233-Cali Fed Nat Mortgage Assn 04/14/97 2,948,309.38 3,000,000.00 2,991,090.00 6.680 -7.035 7.133 03/14/02 1,717
234 Fed Nat Mortgage Assn 05/21/97 2,993,557.55 3,000,000.00 3,006,090.00 6.410 6.404 6.493 05/22/00 1,056
235 Fed Nat Mortgage Assn 06/25/97 2,013,078.55 2,000,000.00 2,004,380.00 6.590 6.342 6.430 05/21/02 1,785
236 Fed Nat Mortgage Assn 06/25/97 2,013,391.85 2,000,000.00 2,004,380.00 6.590 6.337 6.425--05/21/02 1,785
237 Fed Nat Mortgage Assn 06~6/97 2,023,214.53 2,000,000.00 2,013,440.00 6.700 6.332 6.420 06/04/~2 1,799
169 Student Loan Mktg. Assn 01/26/96 4,186,369.35 4,000,000.00 4,110,640.00 7.500 5.458 5.534 03/08/00 981
SUBTOTALS and AVERAGES 186,946,658.34186,210,000.00186,440,878.90 6.072 6.156 895
TREASURY SECURITIES - COUPON
182 U.S. Treasury 03/21/96 2,983,462.35 3,000,000.00 2,981,250.00 5.250 5.792 5.873 07/31/98 .395
183 U.S. Treasury 03/21/96 2,981,302.08 3,000,000.00 2,981,250.00 5.125 5.797 5.877 06/30/98 364
184 U.S. Treasury 03/27/96 2,966,906.36 3,000,000.00 2,961,570.00 4.750 5.697 5.776 08/31/98 426
07/11/1997 City of Palo Alto FI -3
Investments by Type CPA
ACCRUAL
JUNE 30, 1997
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
NUMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
TREASURY SECURITIES -COUPON
185 U.S. Treasury 03/27/96 2,987,708.73 3,000,0~0.00 2,988,270.00 5.125 5.634 5.712 03/31/98 273
190 U.S. Treasury 05/01/96 2,001,184.58 2,000,000.00 2,005;940.00 6.125 5.967 6.050 05/15/98 318
191 U.S. Treasury 05/03/96 2,001,205.36 2,000,000.00 2,005,940.00 6.125 5.966 6.049 05/15/98 318
192 U.S. Treasury 05/03/96 3,025,967.41 3,000,000.00 3,034,680.00 6.750 6.158 6.244 05/31/99 699
198 U.S, Treasury 06/17/96 3,009,252.31 3,000,000.00 3,036,570.00 6.750 6.486 6.576 06/30/99 729
199 U.S. Treasury 07/10/96 3,011,172.72 3,000,000.00 3,043,590.00 6.875 6.581 6.672 07/31/99 760
SUBTOTALS and AVERAGES 24,968,161.90 25,000,000.00 25,039,060.00 6.014 6.097 489
GINNIE MAE’S
161 Fed Home Ln Mort Corp 07/05/83
162 Fed Home Ln Mort Corp 02/16/79
~60 Govt. Natl. Mortgage Assn 01/26/87
SUBTOTALS and AVERAGES
TOTAL INVESTMENTS and AVERAGES
44,312.44 43,231.65 42,475.10 12.450 11.875 12.039 09/15/09 4,459
95,208.66 96,883.95 104,819.71 10.000 10.120 10.261 02/01/09 4,233
272,055.89 263,891.74 283,351.18 9.000 8.449 8.566 11/15/16 7,077
411,S76.99 404,007.34 430,645.99 9.204 9.332 6,137
222,614,007.34
223,326,397.23 222,910,584.89 6.045% 6.128%815
Attachment C
Investment Policy Compliance
as of June 30, 1997
No more than 10 percent of the portfolio in collateral~zed 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 withany 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 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 of the portfolio will exceed 95 percent of the amortized cost
basis of the portfolio.
a:invcompl ’~"~
0.00%
.45%
13.27%
$14 million
$115 million
.18°./o
99.8%
0.00%
n/a
0.00%
n/a
No exceptions
.90%
0.00%