HomeMy WebLinkAbout1996-07-18 City Council (4)C ty
City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:JULY 18, 1996 CMR:354:96
SUBJECT:CITY OF PALO ALTO’S INVESTMENT ACTIVITY REPORT
FOR THE FOURTH QUARTER, FISCAL YEAR 1995-96
This report summarizes the status of the City’s investment portfolio as of the fourth quarter
of the 1995-96 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.
EXECUTIVE SUMMARY
Investment Portfolio as of June 30, 1996
The City’s investment portfolio is detailed in Attachment A. It 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, 1996. In addition to the City’s investment portfolio,
Attachment B lists all funds held by the City or managed by outside parties as of June 30,
1996.
The face value of the City’s portfolio is $203.4 million, which consists of $95 million, or
46.7 percent, maturing in less than two years. Most of the investments, $191 million, or 93.9
percent, are in United States government securities. The current market value of the portfolio
is 99.3 percent of the book Value. The market valuation is provided by Union Bank of
California, which is the City’s safekeeping agent.
CMR:354:96 Page 1 of 4
Investment Portfolio Activity_ Summary_ for 1995-96
The face value of the City’s investment portfolio grew $13.4 million during 1995-96. This
increase is consistent with recent years’ experience, reflecting savings in operating budgets,
budgeted increases in reserves, incomplete capital projects and strong revenues. The average
life of the portfolio increased from 1.4 years to 2.01 years. This is a result of a reduction of
$16 million in shorter-term investments of less than one year maturity, and $5 million in U.S.
Treasury notes which matured, being offset with an increase of $42.1 million in U. S. agency
securities in the three year maturity range. At June 30, balances held in overnight money
market funds were $7.7 million less than at the beginning of the year. During the year,
however, balances inthese overnight funds were as large as $28 million in December 1995,
at the point when the yield on these investments was higher than yields on investments with
terms up to one and one-half years. This known as an "inverted yield curve". As the yield
on the 30-year treasury bond increased by 100 basis points, and the yield curve became more
normal (i.e. upward sloping from short-term to long-term), money was drawn from the
ovemight funds and placed in longer term investments.
For the 1995-96 fiscal year, interest totaled $11.5 million, or 102.8 percent of the 1995-96
budget of$11.2 million. The City’s portfolio yield showed a slight increase during the year,
from 5.87 as of June 30, 1995 to 5.93 percent as of June 30, 1996. The effective rate of
return for the year was 5.89 percent. This compares to Local Agency Investment Fund’s
(LAIF) current yield of 5.53 percent, and the current yield on the two-year Treasury note of
6.09 percent. The City’s yield was achieved by lengthening the portfolio term.
Fourth Quarter Investment Summary_
During the fourth quarter, the portfolio grew by $7 million. Thirteen and a half million
dollars in U. S. agency notes, having yields of around 6.15 percent matured. During the
fourth quarter, staff invested $16 million in U. S. agency securities with an average yield of
6.41 percent, and $10 million in United States Treasury notes with an average yield of 6.25
percent. Due to increasing yields over the last few months, $4.2 million was drawn down
from short-term money market funds yielding about 5 percent, to place in longer term
investments. In addition, $1.3 million was withdrawn from the money market funds and
placed in the City’s bank account. Interest income on an accrual basis for the fourth quarter
of 1995-96 was $2.95 million.
During this quarter, the Federal Reserve Open Market’ Committee (FOMC) did not change
either the federal funds rate or the discount rate. Despite continuing signs of.economic
momentum, the FOMC apparently believes that growth was not so strong that it was
straining capacity and threatening inflation. The federal funds rate for overnight loans
among banks is currently 5.25 percent, where it has been since January. An indication Of
whether the FOMC will increase either the federal funds or discount rate at its August 20
meeting may be given when the Federal Reserve Chairman, Alan Greenspan, gives his
CMR:35~h96 Page 2 of 4
semiannual report to Congress at a hearing in July. There is a general consensus that the
FOMC is going to increase interest rates to dampen any inflationary pressures, but it is not
clear when that will occur. If the FOMC acts, it will be the first interest rate increase since
February 1995, and would follow a period of monetary easing where there were three rate
cuts between July 1995 and January 1996.
The benchmark 30-year Treasury bond yield rose above the 7 percent level in May, in
response to indications of stronger than expected economic growth: Bond yields are up
nearly 100 basis points (1 percent) since the beginning of 1996.
Availability of Funds for the Next Six Months
Projections indicate receipts will be $96.1 million, and expenditures will be $97.9 million
over the next six months. In addition, securities totaling $17.5 million will mature between
July and December 1996. Also available is $12.4 million in funds which can be withdrawn
on a daily basis from the City’s investments in the LAIF and Fidelity Money Market Fund.
On the basis of the above projections, 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 fourth quarter of fiscal year 1995-96, staff complied with all aspects of the
investment policy. Investments in callable securities remain below the maximum permitted
under the policy. Attachment C lists the different restrictions in the City’s Investment Policy
compared with theportfolio’s actual compliance.
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)Investment Portfolio as of June 30, 1996
B)Consolidated Report of Cash and Investments
C)Investment Policy Compliance
CMR:354:96 Page 3 of 4
PREPARED BY: Linda Craig, Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:
Deputy City Manager,
CITY MANAGER APPROVAL:
Fleming
Manager
CC:N/A
CMR:354:96 Page 4 of 4
ATTACHMENT A
.07/12/1996
INVESTMENT
NUMBER ISSUER
PURCHASE
DATE
City of Palo Alto
Investments by ~
JUNE 30;~ 1996
BOOK VALUE FACE VALUE MARKET VALUE
FI -1
CPA
ACCRUAL
STATED ....YTM ....MATURITY DAYS
RATE 360 365 DATE TO MAT
MANAGED POOL ACCOUNTS
158 Fidelity Investments
159 Local Agency Invest. Fund
SUBTOTALS ¯ and AVERAGES
FEDERAL AGENCY ISSUES - COUPON
154
193
136
137
138
139
140
141.
142
146-Cali
147-Cali
148-Cali
149-Call
150-Call
151-Step Up
152-Step Up
153-Step Up
166
167-Cali
172
173
177-Cali
179-Cali
187
188
189
127
178-Cali
164
iii
112
113
114
115
116
117
118
119
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
Fed Home Ln Mort Corp
Fed Home Ln Mort Corp
Federal Land Bank
Fed Nat Mortgage Assn
Fed Nat Mortgage AssD
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
3,300,000.00 3,300,000.00 3,300,000.00 5.070 5.001 5.070
9,100,000.00 9,100,000.00 9,100,000.00 5.502 5.427 5.502
12,400,000.00 12,400,000.00 12,400,000.00
07/27/95
05/03/96
.05124194
lO/25/94
03/07/94
06116195
06/19/95
08/02/94
o9/26/94
o2/18/94
02/14/94
02/09/94
02/10/94
o2/11/94
o4/13/94
o4/15/94
o4/14/94
11/16/95
12/27/95
02115196
02/15/96
02/21/96
02/28/96
04/23/96
04/23/96
05/06/96
03/21/94
02/23/96
01/20/77
o7/14/94
08125194
Ol/12/87
01/25/94
04/27/95
08/25/95
o8/16/95
06/08/95
o8/15/95
Ol/11/93
3,000,000.00
1,995,944.13
2,507,311.10
3,000,000.00
4,997,152.78
2,000,000.00
3,000,000.00
3,002,784.17
3,983i056.34
2,000,000.00
2,000,000.00
2,000,000.00
2,000,000.00
2,000,000.00
4,150,000.00
2,925,000.00
2,925,000.00
4,995,060.58
3,000,000.00
2,002,558.10
4,010,503.85
1,550,000.00
2,000,000.00
2,000,000.00
2,000,000.00
2,000,000.00
2,000,075.23
2,000,000.00
500,000.00
5,001,924.76
8,045,315.q9
2,000,147.74
1,998,722.12
4,003,752.65
4,000,000.00
4,150,640.12
3,017,767.57
4,178,697.60
999,856.59
3,000,000.00 3,000,930.00
2,000,000.00 1,995,620.00
2,500,000.00 2,512,500.00
3,000,000.00 3,011,760.00
5,000,000.00 4,979,700.00
2,000,000.00 1,998,760.00
3,000,000.00 2,998,140.00
3,000,000.00 3,013,140.00
4,000,000.00 4,020,000.00
2,000,000.00 1,953,760.00
2,000,000.00 1,953,760.00
2,000,000.00 1,953,760.00
2,000,000.00 1,953,760.00
2,000,000.00 1,955,760.00
4,150,000.00 4,173,157.00
2,925,’000.00 2,941~321.50
2,925,000.00 2,941,321.50
5,000,000.00 4,923,450.00
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
2,000,000.00
2,000,000.00
500,000.00
5,000,000.00
8,000,000.00
2,000,000.00
2,000,000.00
4,000,000.00
4,000,000.00
4,000,000.00
3,000,000.00
.4,000,000.00
1,000,000.00
2,921,250.00
1,963,120.00
3,858,124.00
1,492,851.50
1,910 000.00
1,988 760.00
1,988 760.00
1,991 880.00
1,995 620.00
1,907 500.00
504 690.00
5,003 150.00
8,080 000.00
2,020 000.00
1,986 360.00
4,029 240.00
4,001 360.00
4,163 760.00
3,015 810.00
4,182 520.00
996 250.00
5.313 5.387
5.750 5.750 5.830 08/01/96 31
5.500 5.674 5.753 05/01/97 304
7.100 6.007 6.090 10/25/96 116
6.700 6.608 6.700 10/25/96 116
5.180 5.271 5.344 ~03/07/97 249
’5.890 5.809 5.890 06/16/97 350
5.890 5.890 5.971 06/16/9~350
6.525 6.334 6.422 07/11/97 375
6.530 6.839 6.934 09/02/97 428
5.380 5.496 5.572 12/14/98 896
5.380 5.496 5.572 12/14/98 896
5.380 5.496 5.572 12/14/98 896
5.380 5.496 5.572 12/14/98 896
5.380 5,496 5.572 12/14/98 896
6.000 5.~33 5.914 04/13/01 1,747
6.000 5.833 5.914 04/13/01 1,747
6.000 5.854 5.936 04/13/01 1,747
5.660 5.706 5.785 11/09/98 861
6.250 6.193 6.279 12/27/00 1,640
4.920 4.835 4.902 02/09/98 588
5.055 4.945 5.014 02/09/99 953
5.965 5.965 6.048 02/21/01 1,696
5.860 "5.860 5.941 02/28/01 1,703
6.100 6.100 6.185 04/23/99 1,026
6.100 6.100 6.185 04/23/99 1,026
6.210 6.210 6.296 05/06/99 1,039
5.4~0 5.389 5.464 03/21/97 263
5.600 5.600 5.678 02/23/01 1,698
7.350 7.249 7.350 01/20/97 203
8.000 6.249 6.336 07/10/96 9
7.600 6.414 6.504 01/10/97 193
7.600 7.580 7.685 01/10/97 193
4.380 4.487 4.550 01/21/97 204
6.770 6.547 6.638 04/14/97 287
6.110 6.026 6.110 08/25/97 420
9.550 6.049 6.133 09/10/97 436
6.450 5.918 6.000 12/08/97 525
9.550 6~085 6.170 12/10/97 527
6.050 "5.978 6.061 01/12/98 560
1
1
07/12/1996 City of Palo Alto FI -2
~CPAINVESTMENTS BY TYPE ACCRUAL
JUNE 30, 1996
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
121 Fed Nat Mo@tgage Assn 01/11/93 1,999,713.18 2,000,000.00 1,992,500.00 6.050 5.978 6.061 01/12/98 560
122 Fed Nat Mortgage Assn 01/12/93 1,999,713.02 2,000,000.00 1,992,500.00 6.050 5.978 6.061 01/12/98 560
123 Fed Nat Mortgage Assn ¯10/05/95 4,001,173.27 4,000,000.00 3,971,400.00 5,950 5.854 5.935 09/28/98 819
124 Fed Nat Mortgage Assn 10/06/95 4,001,144.25 4,000,000.00 3,971,400.00 5.950 5.854 5.935 09/28/98 819
165 Fed Nat Mortgage Assn ii/15/95 5,251,125.44 5,000,000.00 5,226,550.00 9.550 5.513 5.590 11/10/97 497
168 Fed Nat Mortgage Assn 01/26/96 4,002,283.64 4,000,000.00 3,827,880.00 5.550 5.459 5.535 01/17/01 1,661
170 Fed Nat Mortgage Assn 01/26/96 4,472,471.39 4,000,000.00 4,315,000.00 8.900 5.415 5.490 06/12/00 1,442
171 Fed Nat Mortgage Assn.02/09/96 3,~09,101.31 3,000,000.00 2,919,060.00 5.200 5.087 5.158 01/25/99 938
180 Fed Nat Mortgage Assn 03/07/96 2,986,845.26 3,000,000.00 2,920,440.00 5.280 5.385 5.460 03/01/99 973
181 Fed Nat Mortgage Assn 03/13/96 2,956,973.18 3,000,000.00 2,927,670.00 5.400 5.907 5.989 03/12/99 984
186 Fed Nat Mortgage Assn 04/18/96 1,984,810.31 2,000,000.00 1,972,400.00 5.840 6.061 6.145 03/29/99 1,001
194 Fed Nat Mortgage Assn 05/06/96 1,991,217.21 2,000,000.00 I,’995,280.00 6.625 6.641 6.733 04/18/01 1,752
195 Fed Nat Mortgage Assn 05/06/96 1,749,623.70 1,790,000.00 1,753,036.50 6.160 6.631 6.723 04/03/01 1,737
196 Fed Nat Mortgage Assn 05/31/96 2,331,863.67 2,205,000.00 2,336,040.96 8.700 6.421 6.510 06/10/99 1,074
197 Fed Nat Mortgage Assn 05/31/96 2,115,069.09 2,000,000.00 2~,I18,651.94 8.700 6.421 6.510 06/10/99 1,074
155 Student Loan Mktg. Assn 05/02/95 4,026,458.00 4,000,000.00 4,050,000.00 7.875 6.566 6.657 02/03/97 217
169 Student Loan Mktg. Assn 01/26/96 4,255,751.94 4,000,000.00 4,108,760.00 7.500 5.458 5.534 03/08/00 1,346
SUBTOTALS and AVERAGES 166,076,609.08164,545,000.00164,678,174.90 5.901 5.983 774
TREASURY SECURITIES - COUPON
107 U.S, Treasury 12/01/93 1,998,771.12 2,000,000.00 1,991,880.00 4.375 4.489 4.551 11/15/96 137
108 U.S. Treasury ii/17/93 1,999,589.09 2,000,000.00 1,991,880.00 4.375 4.373 4.434 11/15/96 137
182 U.S. Treasury 03/21/96 2,968,152.57 3,000,000.00 2,947,500.00 5.250 5.792 5.873 07/31/98 760
183 U.S. Treasury 03/21/96 2,962,552.08 3,000,000.00 2,944,680.0Q 5.125 5.797 5.877 06130/98 729
184 U.S. Treasury 03/27/96.2,938,551.47 ’3,000,000.00 2,914,680.00 4.q50 5.697 5.776 08/31/98 791
185 U.S. Treasury 03/27/96 2,971,275.34 3,000,000.00 2,953,140.00 5.125 5.634 5.712 03/31/98 638
190 U.S. Treasury 05/01/96 2,002,544.25 2,000,000.00 2,000,000.00 6.125 5.967 6.050 05/15/98 683
191 U.S. Treasury 05/03/96 2,002,588.86 2,000,000.00 2,000,000.00 6.125 5.966 6.049 05/15/98 683
192 U.S. Treasury 05/03/96 3,039,526.94 3,000,000.00 3,033,750.00 6.750 6.158 6.244 05/31/99 1,064
198 U.S. Treasury 06/17/96 3,013,884.81 3,000,000.00 3,034,680.00 6.750 6.486 6.576 06/30/99 1,094
SUBTOTALS and AVERAGES 25,897,436.53 26,000,000.00 25,812,190.00 5.704 5.784 7~2
GINNIE MAE’S
161 Fed Home Ln Mort Corp 07/05/83 59,687.44 58,231.65 58,013.28 12.450 11.875 12.039 09/15/09 4,824
162 Fed Home LnMort Corp 02/16/79 115,872.66 117.,911.55 127,365.70 10.00b i0.120 10.261 02/01/09 4,598
160 Govt. Natl. Mortgage Assn 01/26/87 335,537.81 325,468.62 344,798.26 9.000 8.449 8.566 11/15/16 7,442
SUBTOTALS and AVERAGES
TOTAL INVESTMENTS and AVERAGES
DEFINITIONS
511,097.91 501,611.82 530,177.24 9.228 9.356 6,491
203,446,611.82
204,885,143.52 203,420,542.14 5.849%5.930%733"
====================================================================================
Book Value: The cost of an investment, adjusted for amortization of purchase premiums
or discounts, as of the date of the report.
Face Value: 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
tothe principal invested over the life of the investment.
Attachment B
Consolidated Report
City of Palo Alto Cash and Investments
Fourth Quarter, Fiscal Year 1995-96
Book Value Market Value
City Investment Portfolio (see Attachment A)$204,885,144 $ 203,420,542
Other Funds Held by the City
Cash with Bank of America
1995 Utility Revenue Bond Proceeds
Fidelity Fund - Treasury Class I
Total
$3,645,967
$ 6,988,630
$10,634,597
$
$
3,645,967
6,988,630
10,634,597
Funds Under Management of Contracted Parties
Fiscal Agent Debt Service Payments and Reserves
First Trust California
Golf Course Corporation Lease/Reserve Fund
Palo Alto Public Improvement Corporation
Lease/Reserve Fund
Construction Fund
Total
162,190
779,555
953,425
Employee Deferred Compensation Acccounts
(March 31, 1996)
Great Western Bank
ICMA Retirement Corporation
ITT Hartford
Total
$ 822,037
$12,658,451
$21,453,776
TOTAL $35,887,689
$
$
161,560
779,555
952,795
822,037
12,658,451
21,453,776
34,934,264
35,887,059
Attachment C
Investment Policy Compliance
as of June 30, 1996
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 negotiable CDs.
- No more than $2 million with any one institution.
- No negotiable CDS with maturities beyond 90 days.
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 investments
(specifically, there will be no investments involving Reverse Repurchase
Agreements).
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 10 percent of portfolio in callable agency securities.
No more than 10 percent of portfolio in government agency Multi-Step-up
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.
0.00%
0.00%
n/a
n/a
0.00%
n/a
0.00%
n/a
No exceptions
2.45%
0.00%
1.62%
9.11%
4.91%
$32.5 million
available
$95 million
.24%
99.29%
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