HomeMy WebLinkAbout1996-04-18 City Council (20)City of Palo Alto
City Manager’s Report
TO:
FROM:
HONORABLE CITY COL~CIL
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
APRIL 18, 1996 CMR:238:96
CITY OF PALO ALTO’S INVESTMENT ACTIVITY REPORT
FOR THE THIRD QUARTER, FISCAL YEAR 1995-96
REQUEST:
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 1995-96 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 March 31, 1996
The City’s investment portfolio is detailed in Attachment B. It is grouped by investment
type, and includes 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 March 31, 1996.
The face value of the City’s portfolio is $196.4 million, which consists of$117.3 million, or
60 percent, maturing in less than two years. Most of the investments, $179.6 million, or 92
percent, are in United States governmental securities. The current market value of the
CMR:238:96 Page 1 of 4
portfolio is 99.7 percent of the book value and the average life is 1.92 years. The market
valuation is provided by Bank of California, which is the City’s safekeeping agent.
The total portfolio has increased during this fiscal year by $6.4 million as of the end of the
third quarter. This increase is consistent with recent years’ experience, reflecting budget
savings and budgeted increases in Utility Funds reserves.
Funds Held by the City. or Managed Under Contract
The new State law requiring detailed reports on the City’s investments also contains a
provision that the report shall include the type of investment, issuer, date of maturity, par
value and dollar amount invested on all securities, investments and moneys held by the local
agency, and the report shall include a description of any of the local agency’s funds that are
under management of contracted parties. In order to comply with this new legislation, the
staff report includes a consolidated report of all City funds, including those not held in the
investment portfolio. The report includes: cash in the 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 which
are technically considered City funds. The most recent data on the funds held by the fiscal
agent is as of March 22, 1996, while the balances in the deferred compensation accounts are
as of December 31, 1995.
Investments Made During Third Quarter
During the third quarter of the fiscal year, the portfolio grew by $3.8 million. Staff replaced
$6 million in maturing U. S. Treasury notes, having an average yield of 4.5 percent, with $12
million in U. S. Treasury notes having an average yield of more than 5.7 percent. In
addition, $15 million in maturing or called U. S. Agency bonds, having yields of around 6.5
percent, were replaced with $20.5 million in U. S. Agency securities with an average yield
of 5.5 percent. Due to the fact that yields increased in the two-to-three year range, $8.7
million was drawn down from short-term money market funds and placed in U. S. Treasury
and Agency investments.
Investment Yields
Interest income on an accrual basis for the third quarter of 1995-96 was $2.9 million. For
the first nine months of the 1995-96 fiscal year, interest totaled $8.6 .million, or 76.8 percent
of the 1995-96 budget of$11.2 million. The current effective rate of return is 5.9 percent.
This compares to Local Agency Investment Fund’s yield of 5.63 percent, and the yield on
the two-year Treasury bond of 5.89 percent
During this quarter, the Federal Reserve Open Market Committee (FOMC) lowered both the
Federal funds rate and the discount rate by 25 basis points (one quarter of one percent). In
CMR:238:96 Page 2 of 4
mid-February, favorable economic news, combined with testimony by Federal Reserve
Board Chairman Alan Greenspan, caused an upswing of more than 50 basis points in the
bond market. At its meeting on March 27, the FOMC did not make any adjustment to its
rates. By the end of the quarter, yields on the two-year Treasury bond were 5.90 percent, an
increase of 70 basis points from January 1, 1996. It is not clear at this time how long the
current upswing will last, nor whether some downward correction will occur.
Availability_ of Funds for the Next Six Months
The normal flow of revenues from the City’s utility billings, sales tax, utility user taxes,
transient occupancy taxes and general user fees is normally sufficient to fund ongoing
expenditures. Projections indicate receipts will be $95.9 million and expenditures will be
$94.7 million over the next six months. In addition, securities totaling $27 million will
mature between April and October, 1996. The City also has $16.8 million available in the
Local Agency Investment Funds (LAIF) and in a Fidelity money market fired, which can be
withdrawn on a daily basis. 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 second quarter of fiscal year 1995-96, staff complied with all aspects of the
investment policy. Investments in callable securities are approaching the maximum limits
permitted under the policy. Attachment C lists the various restrictions in the City’s invest-
ment policy compared with the portfolio’s actual compliance.
ENVIRONMENTAL ASSESSMENT:
There is no environmental assessment required for this report.
ATTACHMENTS:
A)Consolidated Report of Cash and Investments
B)Investment Portfolio, as of March 31, 1996
C)Investment Policy Compliance
CMR:238:96 Page 3 of 4
PREPARED BY: Linda Craig, Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
Deputy City Manager,
Administrative Services
CC:n/a
CMR:238:96 Page 4 of 4
Attachment A
Consolidated Report
City of Palo Alto Cash and Investments
Third Quarter, Fiscal Year 1995-96
Book Value Market Value
City. Investment Portfolio (see Attachment B)$197.757.200 $197.070.209
Other Funds Held by the Ci~
Cash with Bank of America $1,974,373 1,974,373
1995 Utility Revenue Bond Proceeds
Fidelity Fund - Treasury Class I
Total
$ 8.522,154
$10.496.527
$ 8.522.!54
$ 10.496.527
Funds Under Management of Contracted Parties
Fiscal A~ent Debt Service Payments and Reserves
’First Trust California
Golf Course Corporation Lease!Reserve Fund
Palo Alto Public Improvement Corporation
Lease/Reserve Fund
Construction Fund
$162,365
$ 770,515
11,537
!62,105
770,515
11,537
Bank of California
Major Equipment Lease Purchase Escrow
Total
Employee Deferred Compensation Acccounts
Great Western Bank
ICMA Retirement Corporation
ITT Hartford
Total
$ 3.021
$ 947,438
$ 857,217
$12,041,904
$20.723.668
$33.622.789
~.0_1
$ 947,178
$ 857,217
12,041,904
20.723.668
$ 33.622.789
TOTAL $34.570.227 $ 34.569.967
04/15/1996
Attachment B
City of Palo Alto FI -!
Investments by Type CPA
ACCRUAL
MARCH 31, 1996
INVESTMENT PURCHASE STATED ....YTM ....MATURITY DAYS
h-u~MBER ISSUER DATE BOOK VALUE FACE VALUE ~RKET VALLTE RATE 360 365 DATE TO MAT
~ANAGED POOL ACCOUNTS
158 Fidelity Investments
159 Local Agency invest. Fund
SUBTOTALS and AVERAGES
2,300,000.00 2,300,000.00 2,300,000.00 5.260 5.188 5.260
14,500,000.00 14,500,000.00 14,500,000.00 5.630 5.553 5.630
16,800,000.00 16,800,000.00 16,800,000.00 5.503 5.579
1
!
FEDERAL AGENCY ISSUES - COUPON
154 Federal Fa-~Tn Credit Bank 07/27/95 3,000,000.00 3,000,000.00 3,004,680.00 5.750 5~750 5.830 08/01/96 122
132 Federal Home Loan Bank 05/18/94 2,502,528.69 2,500,000.00 2,503,900.00 7.750 6.031 6.115 04/25/96 24
!33 Federal Home Loan Bank 05/09/94 2,998,949.58 3,000,000.00 3,000,750.00 5.760 6.095 6.180 05/03/96 32
134 Federa! Home Loan Bank 05/11/95 3,000,000.00 3,000,000.00 3,002,820.00 6.105 6.021 6.105 05/16/96 45
135 Federa! Home Loan Bank 06/17/94 3,000,000.00 3,000,000.00 3,003,750.00 5.835 5.755 5.835 06/17/96 77
136 Federa! Home Loan Bank 05/24/94 2,513,083.02 2,500,000.00 2,524,225.00 7.100 6.007 6.090 10/25/96 207
137 Federal Home Loan Bank 10/25/94 3,000,000.00 3,000,000.00 3,021,690.00 6.700 6.608 6.700 10/25/96 207
138 Federal Home Loan Bank 03/07/94 4,996,111.11 5,000,000.00 4,979,700.00 5.180 5.271 5.344 03/07/97 340
139 Federa! Home Loan Bank 06/16/95 2,000,000.00 2,000,000.00 2,003,760.00 5.890 5.809 5.890 06/16/97 441
140 Federa! Home Loan Bank 06/19/95 3,000,000.00 3,000,000.00 3,005,640.00 5.890 5.890 5.971 06/16/97 441
141 Federal Home Loan Bank 08/02/94 3,003,461.40 3,000,000.00 3,025,320.00 6~525 6~334 6~422 07/11/97 466
142 Federal Home Loan Bank 09/26/94 3,979,434.19 4,000,000.00 4,037,520.00 6.530 6.839 6.934 09/02/97 519
!43-Step Up Federal Home Loan Bap~10/20/95 1,000,000.00 1,000,000.00 1,002,850.00 5.950 5.950 6.033 04/20/98 749
144-Step Up Federa! Home Loan Bank 10/20/95 2,000,000.00 2,000,000.00 2,005,700.00 5.950 6.332 6.420 04/20/98 749
!46-Cali Federa! Home Loan Bank 02/18/94 2,000,000.00 2,000,000.00 1,961,880.00 5.380 5.496 5.572 12/14/98 987
!47-Cali Federal Home Loan Bank 02/14/94 2,000,000.00 2,000,000.00 1,961,880.00 5.380 5.496 5.572 12/14/98 987
148-Cali Federa! Home Loan Bank 02/09/94 2,000,000.00 2,000,000.00 1,961,880.00 5.380 5.496 5.572 12/14/98 987
149-Cali Federa! Home Loan Bank 02/10/94 2,000,000.00 2,000,000.00 1,961,880.00 5.380 5.496 5.572 12/14/98 987
!50-Call Federa! Home Loan Bank 02/11/94 2,000,000.00 2,000,000.00 1,961,880.00 5.380 5.496 5.572 12/14/98 987
!5i-Step Up Federal Home Loan Bank 04/13/94 4,150,000.00 4,150,000.00 4,181,167.00 5.700 5.622 5.700 04/13/01 1,838
!52-Step Up Federa! Home Loan Bank 04/15/94 2,925,000.00 2,925,000.00 2,946,966.50 5.700 5.622 5.700 04/13/01 1,838
153-Step Up Federa! Home Loan Bank 04/14/94 2,925,000.00 2,925,000.00 2,946,966.50 5.700 5.622 5.700 04/13/01 1,838
166 Federa! Home Loan Bank 11/16/95 4,994,536.35 5,000,000.00 4,950,000.00 5.667 5.628 5.706 11/09/98 952
167-Cali Federal Home Loan Bank 12/27/95 2,998,265.67 3,000,000.00 2,940,000.00 6.250 6.193 6.279 12/27/00 1,731
172 Federa! Home Loan Bank 02/15/96 2,002,956.41 2,000,000.00 1,965,620.00 4.920 4.835 4.902 02/09/98 679
173 Federa! Home Loan Bank 02/15/96 4,011,511.69 4,000,000.00 3,895,000.00 5.055 4.945 5.014 02/09/99 1,044
!77-Cai!Federal Home Loan Bank 02/21/96 1,550,000.00 1,550,000.00 1,503,980.50 5.965 5.965 6.048 02/21/01 1,787
179-Cali Federa! Home Loan Bank 02/28/96 2,000,000.00 2,000,000.00 1,924,380.00 5.860 5.860 5.941 Q2/28/01 1,794
127 Fed Home Ln Mort Corp 03/21/94 2,000,101.27 2,000,000.00 1,997,500.00 5.470 5.389 5.464 03/21/97 354
178-Cali Fed Home Ln Mort Corp 02/23/96 2,000,000.00 2,000,000.00 1,928,120.00 5.600 5.600 5.678 02/23/01 1,789
164 Federal Land Bank 01/20/77 500,000.00 500,000.00 507,345.00 7.350 7.249 7.350 01/20/97 294
!i0 Fed Nat Mortgage Assn 04/18/95 2,000,000.00 2,000,000.00 2,000,880.00 6.430 6.430 6.519 04/18/96 17
!!!Fed Nat Mortgage Assn 07/14/94 5,021,172.31 5,000,000.00 5,035,950.00 8.000 6.249 6.336 07/10/96 I00
112 Fed Nat Mortgage Assn 08/25/94 8,066,894.74 8,000,000.00 8,125,040.00 7.600 6.414 6.504 01/10/97 284
113 Fed Nat Mortgage Assn 01/12/87 2,000,218.09 2,000,000.00 2,031,260.00 7.600 7.580 7.685 01/10/97 284
114 Fed Nat Mortgage Assn 01/25/94 1,998,147.07 2,000,000.00 1,983,100.00 4.380 4.487 4.550 01/21/97 295
115 Fed Nat Mortgage Assn 04/27/95 4,004,946.07 4,000,000.00 4,047,000.00 6.770 6.547 6.638 04/14/97 378
116 Fed Nat Mortgage Assn 08/25/95 4,000,000.00 4,000,000.00 4,015,720.00 6.110 6.026 6.110 08/25/97 . 511
117 Fed Nat Mortgage Assn 08/16/95 4,182,242.94 4,000,000.00 4,211,240.00 9.550 6.049 6.133 09/10/97 527
04/15/1996 City of Palo Alto FI -2
Investments by Type CPA
ACCRUAL
MARCH 31, 1996
INVESTMENT PURCHASE STATED ....YTM ....~ATURITY DAYS
~JMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
FEDERAL AGENCY ISSUES - COUPON
118 Fed Nat Mortgage Assn 06/08/95 3,020,860.57 3,000,000.00 3,030,660.00 6.450 5.918 6.000 12/08/97 616
119 Fed Nat Mortgage Assn 08/15/95 4,209,685.63 4,000,000.00 4,228,760.00 9.550 6.085 6.170 12/10/97 618
120 Fed Nat Mortgage Assn 01/11/93 999,833.17 1,000,000.00 999,690.00 6.050 5.978 6.061 01/12/98 651
121 Fed Nat Mortgage Assn 01/11/93 1,999,666.33 2,000,000.00 1,999,380.00 6.050 5.978 6.061 01/12/98 651
122 Fed Nat Mortgage Assn 01/12/93 1,999,666.15 2,000,000.00 1,999,380.00 6.050 5.978 6.061 01/12/98 651
123 Fed Nat Mortgage Assn 10/05/95 4,001,304.12 4,000,000.00 3,996,320.00 5.950 5.854 5.935 09/28/98 910
124 Fed Nat Mortgage Assn 10/06/95 4,001,271.87 4,000,000.00 3,996,320.00 5.950 5.854 5.935 09/28/98 910
i65 Fed Nat Mortgage Assn 11/15/95 5,297,344.84 5,000,000.00 5,285,950.00 9.550 5.513 5.590 11/10/97 588
168 Fed Nat Mortgage Assn 01/26/96 4,002,409.27 4,000,000.00 3,896,252.00 5.550 5.459 5.535 01/17/01 1,752
170 Fed Nat Mortgage Assn 01/26/96 4,502,395.69 4,000,000.00 4,381,240.00 8.900 5.415 5.490 06/12/00 1,533
171 Fed Nat Mortgage Assn 02/09/96 3,009,987.80 3,000,000.00 2,935,230.00 5.200 5.087 5.158 01/25/99 1,029
180 Fed Nat Mortgage Assn 03/07/96 2,985,612.01 3,000,000.00 2,938,800.00 5.280 5.385 5.460 03/01/99 1,064
181 Fed Nat Mortgage Assn 03/13/96 2,952,985.11 3,000,000.00 2,952,187.50 5.400 5.907 5.989 03/12/99 1,075
155 Student Loan Mktg. Assn 05/02/95 4,037,690.17 4,000,000.00 4,075,000.00 7.875 6.566 6.657 02/03/97 308
169 Student Loan Mktg. ~sn 01/26/96 4,273,097.59 4,000,000.00 4,157,520.00 7.500 5.458 5.534 03/08/00 1,437
SUBTOTALS and AVERAGES 164,618,370.92163,050,000.00163,941,630.00 5.864 5.946 758
TREASURY SECURITIES -COUPON
!07 U.S. Treasury 12/01/93 1,997,954.86 2,000,000.00 1,987,500.00 4.375 4.489 4.55!11/15/96 228
108 U.S. Treasury 11/17/93 1,999,316.16 2,000,000.00 1,987,500.00 4.375 4.373 4.434 11/15/96 228
182 U.S. Treasury 03/21/96 2,964,330.88 3,000,000.00 2,960,640.00 5.250 5.792 5.873 07/31/98 851
183 U.S. Treasury 03/21/96 2,957,864.58 3,000,000.00 2,955,930.00 5.125 5.797 5.877 06/30/98 820
184 U.S. Treasury 03/27/96 2,931,482.17 3,000,000.00 2,925,930.00 4.750 5.697 5.776 08/31/98 882
i85 U.S. Treasury 03/27/96 2,967,!78.24 3,000,000.00 2,963,430.00 5.125 5.634 5.712 03/31/98 729
SUBTOTALS and AVERAGES 15,818,126.89 16,000,000.00 15,780,930.00 5.402 5.477 671
GI~-NIE MAE’S
161 Fed Home Ln Mort Corp 07/05/83 59,687.44 58,231.65 59,905.81 12.450 11.875 12.039 09/15/09 4,915
162 Fed Home Ln Mort Corp 02/16/79 122,853.09 125,014.80 137,296.25 I0.000 10.120 10.261 02/01/09 4,689
160 Govt. Nat!. Mortgage Assn 01/26/87 338,161.93 328,014.00 350,446.94 9.000 8.449 8.566 11/15/16 7,533
SUBTOTALS and AVERAGES
TOTAL INVESTMENTS and AVERAGES
520,702.46 511,260.45 547,649.00 9.236 9.364 6,562
196,361,260.45
197,757,200.27 197,070,209.00 5.805%5.886%702
====================================================================================
DEFINITIONS
Book Value:
Face Value:
The cost of an investment, adjusted for amortization of purchase premiums
or discounts, as of the date of the report.
The value of the security at maturity; also known as the par value.
Market Value: The recorded market value as of the date of the report.
Stated Rate: The interest or coupon rate, or the yield on a security purchased at a
discount.
Yield to Maturity: Calculated yield to maturity on a 360 and a 365 day basis, according
to the principal invested over the life of the investment.
Attachment C
Investment Policy Compliance
as of March 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 negotiable CDs.0.00%
-No more than $2 million with any one institution,n/a
- No negotiable CDs with maturities beyond 90 days.rda
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 investments
(specifically, there will be no investments involving Reverse Purchase No exceptions
Agreements).
No more than 10 percent of the portfolio in Farm Credit Securities.1.52%
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.1.16%
No more than 10 percent of portfolio in callable agency securities.9.38%
No more than 10 percent of portfolio in government agency Multi-Step-up 6.61%
securities.
Liquidity enough to meet one month’s cash needs.$21.3 million
At least $50 million maturing in less than 2 years.$117.3 million
No more than 20 percent of the portfolio shall be in investments maturing in 5.32%
more than five years.
Market value of the portfolio will exceed 95 percent of the amortized cost 99.65%
basis of the portfolio.
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