CC 06-21-2023 Item No. 13 Monthly Treasurer's Report for May 2023_Written CommunicationsCC 06-21-2023
Item #13
Receive the Monthly
Treasurer's Report for May
2023
Written Communications
From:Griffin
To:City Council; Kristina Alfaro
Cc:City Clerk
Subject:2023-06-21 City Council Meeting Agenda Item #13 Treasurers Investment Report for May 2023
Date:Tuesday, June 20, 2023 6:08:19 PM
Attachments:image0.pngStaff Report.pdf
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PLEASE INCLUDE THIS EMAIL AND ANY ASSOCIATED ATTACHMENTS AS PART OF WRITTEN COMMUNICATIONS FOR THE ABOVE CITY COUNCIL MEETING AGENDA ITEM.
Dear City Council, City Treasurer Alfaro and Staff,
The material for this agenda item #13 is missing the Staff Report. There has been and needs to be an explanation of why this report appears in the agenda, what Attachment A is all about and have it signed off by the staff member responsible, the City Treasurer.
Attachment A is NOT from the City Treasurer. It is the monthly statement from the investment consultant. It is not the responsibility of a contractor or the City Clerk. The City Treasurer needs to sign off on this information every month.
To quote the February 2023 Treasurers Report:
“The City's Municipal Code Section 2.24.050 Investment Authority states that the Treasurer shall make a monthly report of all investment transactions to the City Council.…Per the referenced code provisions, a Treasurer's Investment Report shall be submitted to the … City Council every month.”
Someone looking at this agenda item for the first time would not follow why it’s there. It appears as a random report with no explanation.
Also, when you look at the meeting details for this agenda item it says “Sponsors: Kirsten Squarcia” but this is the responsibility of the City Treasurer, not the City Clerk.
It is encouraging that these financial statements are starting to meet deadlines. Please include the Staff Report by the City Treasurer.
Thank you, Peggy Griffin
P.S. Attached is a copy of the Treasurers Monthly Investment Report for February 2023 (Staff Report).
1
CITY COUNCIL STAFF REPORT
Meeting: April 13, 2023
Subject
Consider the Monthly Treasurer's Investment Report for February 2023
Recommended Action
Receive the Monthly Treasurer's Investment Report for February 2023
Reasons for Recommendation
Background
On May 19, 2022, the City Council approved the City's Investment Policy. Per the City's
Investment Policy, the Treasurer shall submit monthly transaction reports to the City
Council within 30 days of the end of the reporting period per California Government Code
Section 53607. In addition to the monthly transaction reports, quarterly investment reports
are submitted to the City Council approximately 45 days following the end of the quarter.
The quarterly investment report offers a more extensive discussion of the City's economy,
cash flow, and investments.
The City's Municipal Code Section 2.24.050 Investment Authority states that the Treasurer
shall make a monthly report of all investment transactions to the City Council. Lastly, the
City's Municipal Code Section 2.88.100 Duties–Powers–Responsibilities lists one of the
powers and functions of the Audit Committee is "to review the monthly Treasurer's
report."
Per the referenced code provisions, a Treasurer's Investment Report shall be submitted to
the Audit Committee and City Council every month.
Treasurer's Investment Report
The report provides an update on the City's investment portfolio for the month ending
February 28, 2023. The report is as of March 22, 2023.
The attached statements include balances and transactions of the City's investments with
the Local Agency Investment Fund (LAIF) and Chandler Asset Management. While not
governed by the City's Investment Policy, statements for the Public Agency Retirement
2
Services (PARS) Section 115 Trusts are also attached per a request from the Monthly
Treasurer's Report Subcommittee.
The City's General Ledger cash and investments balance was $227.0 million, a $3.0 million
decrease from the prior month due to receipts of $3.0 million, disbursements of $(6.7)
million, and journal adjustments of $0.6 million.
Cash and Investments – General Ledger Balance
Fund Type
Month Ending
January 31,
2023
Receipts Disbursements Journal
Adjustments*
Month Ending
February 28,
2023
General Fund 124,245,311 2,257,903 (5,088,916) 50,848 121,465,145
Special Revenue 43,941,431 153,325 (468,563) - 43,626,194
Debt Service 2,322,250 - - - 2,322,250
Capital Projects 38,731,638 462,480 (288,309) - 38,905,809
Enterprise 11,728,653 158,713 (344,838) 601,620 12,144,148
Internal Service 9,051,351 - (510,244) (8,417) 8,532,690
Total $230,020,633 $3,032,422 $(6,700,870) $644,050 $226,996,235
*Journal adjustments include transactions recorded in other systems and imported into the financial system,
Council-approved budget adjustments, quarterly Cost Allocation Plan (CAP) charges, and quarterly interest
earnings.
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The $227.0 million in cash and investments includes $38.8 million in cash, $21.2 million in
cash equivalents, $149.7 million in investments, and $17.2 million restricted for funding
pension costs.
The City pools cash for all funds except restricted funds. However, the City accounts for
interest earnings, revenues, and expenditures separately for each fund to adequately meet
the purpose and restrictions of each funding source. Pooling funds is a common and
appropriate practice used in public agencies. By pooling funds, the City can benefit from
economies of scale, diversification, liquidity, and ease of administration.
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Cash and Investments – General Ledger Balance
Month Ending
January 31, 2023
Month Ending
February 28, 2023
% of
Portfolio
Cash in banks and on hand
Operating Checking (Wells Fargo) 41,789,796 38,744,116 17%
Workers' Compensation Checking (Wells Fargo) 20,262 41,845 0%
Payroll Checking (Wells Fargo) - - 0%
Restricted for Bond Repayments1 (BNY Mellon) - - 0%
Petty Cash and Change 5,000 4,700 0%
Cash Equivalents
Local Agency Investment Fund 21,242,141 21,242,141 9%
Investments
Investments (Chandler) 149,723,383 149,723,383 66%
Restricted for Pension2 (PARS) 17,240,051 17,240,051 8%
Total Cash and Investments3 $230,020,633 $226,996,235 100%
1 Cash held by fiscal agent for bond repayments
2 In accordance with GASB 67/68, the assets in the Section 115 Pension Trust are reported as restricted cash
and investments in the General Fund. The assets can only be used to fund CalPERS costs.
3 Assets in the Section 115 OPEB Trust are excluded as the City cannot use these assets to fund its own
operations. The assets are held in trust for retirees' post-employment health benefits.
The table below shows the bank balances for the City's cash and investments. Bank and
General Ledger balances differ due to timing. Bank balances do not include outstanding
checks and deposits in transit. The General Ledger is updated quarterly with interest
earnings and annually with the year-end investment market values.
Cash and Investments – Bank Balance
Month Ending
January 31, 2023
Month Ending
February 28, 2023
% of
Portfolio
Cash in banks and on hand
Operating Checking (Wells Fargo) 42,673,289 39,316,220 17%
Workers' Compensation Checking (Wells Fargo) 25,873 42,812 0%
Payroll Checking (Wells Fargo) - - 0%
Restricted for Bond Repayments1 (BNY Mellon) - - 0%
Cash Equivalents
Local Agency Investment Fund 21,281,569 21,281,569 9%
Investments
Investments (Chandler) 148,742,480 147,258,241 65%
Restricted for Pension2 (PARS) 18,507,647 18,035,635 8%
Total Cash and Investments3 $231,230,858 $225,934,478 100%
1 Cash held by fiscal agent for bond repayments
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2 In accordance with GASB 67/68, the assets in the Section 115 Pension Trust are reported as restricted cash
and investments in the General Fund. The assets can only be used to fund CalPERS costs.
3 Assets in the Section 115 OPEB Trust are excluded as the City cannot use these assets to fund its own
operations. The assets are held in trust for retirees' post-employment health benefits.
Local Agency Investment Fund (LAIF)
LAIF is an investment pool administered by the State of California Treasurer and
governed by California Government Code. The City can withdraw funds from LAIF at
any time. As a result, the City uses LAIF for short-term investment, liquidity, and yield.
The City's LAIF account had a balance of $21.3 million. Interest is deposited quarterly.
The December interest rate was 2.07%.
Investment Portfolio
In FY 2018-19, the City conducted a Request for Proposal (RFP) for investment
management services and selected Chandler Asset Management. Under the City's
Treasurer's direction, Chandler Asset Management manages the City's investment
portfolio in accordance with the City's investment objectives. The City's investment
objectives, in order of priority, are to provide:
Safety to ensure the preservation of capital in the overall portfolio
Sufficient liquidity for cash needs
A market rate of return consistent with the investment program
The performance objective is to earn a total rate of return through a market cycle equal to
or above the return on the benchmark index. Chandler Asset Management invests in high-
quality fixed-income securities consistent with the City's Investment Policy and California
Government Code to achieve the objective.
The portfolio's market value was $147.3 million, compared to $148.7 million at the end of
the previous month. The table below includes historical comparisons of the City's
portfolio.
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December 31,
2022
January 31,
2023
February 28,
2023
Market Value 147,282,846 148,742,480 147,258,241
Par Value 156,155,965 156,310,484 156,479,011
Book Value 155,929,700 156,105,058 156,193,550
Average Maturity 2.62 years 2.66 years 2.71 years
Average Modified Duration 2.28 2.28 2.32
Average Purchase Yield 1.70% 1.73% 1.81%
Average Market Yield 4.63% 4.39% 4.89%
Average Quality1 AA/Aa1 AA/Aa1 AA/Aa1
1 S&P and Moody's respectively
The portfolio's market value fluctuates depending on interest rates. When interest rates
decrease after an investment is purchased, the market value of the investment increases.
In contrast, when interest rates increase after an investment is purchased, the market value
of the investment decreases. At the time of purchase, the City intends to hold all
investments until maturity, meaning that changes in market value will not impact the
City's investment principal. If the market value decreases, the City will incur an
unrealized loss. However, the loss will only be realized if the City sells its investments
before their maturity. The market values for the portfolio were provided by Chandler
Asset Management.
Section 115 Trust Investment Portfolio
The City established Section 115 Trusts to reduce pension rate volatility and pre -fund
Other Post-Employment Benefits (OPEB) costs. These trusts are a tax-exempt investment
tool that local governments can use to set aside funds for pension and retiree health costs.
Contributions made to the trust can only be used to fund retirement plans.
Investments in the Section 115 Trusts are governed by separate investment policies, which
are distinct from the City's Investment Policy. On December 6, 2022, City Council
approved the Pension Trust Investment Policy and OPEB Trust Investment Policy. Public
Agency Retirement Services (PARS) administers the trust, while US Bank manages the
investments in accordance with the approved investment policies.
Both Section 115 Trusts are invested in "balanced" portfolios. The investment objective is
designed to provide a moderate amount of current income with moderate growth of
capital. This type of investment strategy is generally recommended for investors with a
long-term time horizon. The strategic asset allocation ranges for this investment objective
are:
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Asset Class Range Target
Equities 50-70% 63%
Fixed Income 20-40% 29%
Real Estate 0-15% 5%
Commodities 0-10% 2%
Cash 0-10% 1%
The Section 115 Pension Trust had a balance of $18.0 million, a decrease of $0.5 million
from the prior month due to investment loss. The Section 115 OPEB Trust had a balance
of $32.8 million, a decrease of $0.9 million from the prior month due to investment loss.
The one-month investment returns were -2.52% for both the Pension Trust and OPEB
Trust.
Compliance
All of the City's investments comply with state law and the City's Investment Policy. In
compliance with California Government Code 53646 (b)(3), the City maintains the ability
to meet its expenditure requirements for the next six months.
Sustainability Impact
No sustainability impact.
Fiscal Impact
No fiscal impact.
California Environmental Quality Act
Not applicable.
_____________________________________
Prepared by: __________________
Thomas Leung
Budget Manager
Reviewed by: __________________
Kristina Alfaro
Director of Administrative Services
Approved for Submission by: __________________
Pamela Wu
City Manager
Attachments:
A – Chandler Investment Report February 2023
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B – Chandler Custodial Statement February 2023
C – PARS Pension and OPEB Account Statement February 2023
D – LAIF Account Statement February 2023