06. Treasurer's Report
ADMINISTRATIVE SERVICES DEPARTMENT
CUPERTINO
CITY HALL
10300 TORRE AVENUE. CUPERTINO, CA 95014-3255
(408) 777-3220 . FAX (408) 777-3109
SUMMARY
Agenda Item No.
~
Meeting Date: November 5, 2007
SUBJECT AND ISSUE
Accept the Treasurer's Investment and Budget Report for September 2007, including a
status report on General Fund Revenue and Expenditures.
BACKGROUND
INVESTMENTS
The market value and cost of the City's portfolio totaled $57.1 million at September 30,
2007. The declining interest rate environment has erased the unrealized paper losses of the
past two years but has also caused the interest rate of the portfolio to start falling. The
portfolio yielded 4.83% in September down from an adjusted 4.87% the previous month
but still up from 4.53% a year ago. The Local Agency Investment Fund (LAIF) yielded
5.23% for September, down from 5.25% for the previous month, but up from 5.02% a year
ago.
Two certificates of deposit matured at 2.7% & 5%. Two 5% Federal agency notes were
called and a US Treasury Bill matured at 5.03%. The City's cash & investment balance
increased by $600,000 due to sales tax receipts.
Staff continues to watch the subprime mortgage situation and it's effect on the City's
investments. LAIF has a small exposure to asset-backed commercial paper and corporate
bond holdings with mortgage lenders, but the short duration of those investments and
diversity of their overall portfolio mitigates the risk. The City's $12.5 million investment in
mortgage-related, government-sponsored agencies, such as the Federal Home Loan Bank
(FHLB), Fannie Mae, and Freddie Mac, is 22% of the overall portfolio, down from 54%
almost two years ago. Fannie and Freddie hold predominantly prime mortgages and the
implied government backing of these agencies and stable funding sources for them has kept
losses from subprime exposure at a minimum. The FHLB has recently advanced a record
amount of funds to mortgage banks to help them through the recent credit crunch, the effect
of which staff is monitoring.
Investments are in full compliance with City investment policy and/or State law, and are
tiered to provide sufficient cash flows to pay City obligations over the next six months.
6 - 1
Treasurer's Investment and Budget Report
November 5, 2007
Page 2 of2
GENERAL FUND REVENUES AND EXPENDITURES
First quarter revenues are down $438,000 or 8% from last year. Sales taxes are up
$700,000 or 53% from the year-ago quarter, led by last year's opening of the Insight sales
office and increased sales by the City's top tax producer. This has offset the upturn in
revenues that was anticipated but has not.materialized from Cupertino Square. However,
sales taxes were not enough to make up for the million-dollar downturn in building and
construction related fees and taxes. The downturn in construction taxes, however, will
occur only in the first quarter, since it's related to the Cupertino Squar~ and Whole Foods
projects of a year ago.
Overall expenditures are up 10% through the first three months, inline with the 11 % budget
increase, including the Recreation enterprises that moved to the General Fund this year.
RECOMMENDA nON
Accept the Treasurer's Investment and Budget Report for September 2007.
S;zh
.~~
David Woo
Finance Director
Approved for submission:
~~~h
David W. Knapp V '
City Manager
Attachments:
1. Investment Portfolio
2. Rate of Return Comparison
3. Compliance with Investment Policy
4. General Fund Budget Report
6-2
City of Cupertino
September 30, 2007
. T UAIr. "'....u....... AIlIII~I'I"n T
liT .......' RATE COST VALUe VALUE
SECURTIlES MATURED/CALLED
12115/03 12115/08 FHLMC callable. step coupon 5.00% 1,000,000 1,000,000 1,000,000 0
03130/04 03130/09 FHLB callable, step coupon 5.00"10 600,000 600,000 600.000 0
03/24/04 09/24/07 Signature Bank. 2.70% 99,000 99,000 99,000 0
03/28/06 09/28/07 Venture Bank 5.00% 97,000 97,000 97,000 0
---- .--
03/28/07 09127/07 US Treasury Bill 5.03% 1,000.000 1,000,000 1,000,000 0
------.
------.- -.
SECURITIES PURCHASED
. ~"-'-"'-
_..._..~
CITY PORTFOLIO
--
CASH
09130/07 Wells Fargo - Workers Comp Checking 17,978 17,978 17,978 0
09130/07 Wells Fargo - Regular Checking 804,695 804,695 804,695 0
09130107 Wells Fargo - Investment Swecp 3.38% 485,188 485,188 485,188 0
1,307,861 1,307,861 1,307,861 0
LAW
09130/07 LAIF - State Pool 5.23% 33,488,806 33,488,806 33,488,806 0
CERTIFICATES OF DEPOSIT
04/05/06 10/05/07 Mercantile Bank of Michigan 5.00"10 97,000 97,000 96,992 (8)
02103/06 02/04/08 PrimeSouth Bank 4.65% 97,000 97,000 96,719 (281)
02/10/06 02/11/08 . Florida Community Bank 4.75% 99,000 99,000 98,732 (268)
03/17/04 03/17/08 American Trust Fed Savings Bank 3.00% 99,000 99,000 97,834 (1,166)
03/19/04 03/19/08 Planters First Cordele GA 3.05% 98,000 98,000 96,850 (1.150)
03/24104 03/24/08 Badger State Bank 3.00% 99,000 99,000 97,787 (1,213)
03/24104 03/24/08 Wilmot State Bank 3.00% 99.000 99,000 97,787 (1,213)
03/26/04 03/26/08 Private Bank & Trust 3.20% 99,000 99,000 97,852 (1,148)
03130/06 03/28/08 First Georgia Banking Company 5.05% 99,000 99,000 98,803 (197)
04/07/04 04107/08 Cole Taylor Bank, step coupon 3.01% 97.000 97,000 95,772 ( 1,228)
._._~.9~04 I 09/26/08 South Coast Community Bank 3.20% 98,000 98,000 95,727 (2,273)
03/17/04 I 03/17/09 Peoples State Bank. 3.40% 99,000 99,000 95,813 (3,\87)
M ____d__;-+
03/24/04 03/24/09 Wash ita Slate Bank 3.35% 99,000 99,000 95,723 (3,277)
--- ---. ._..- - .~.
12!3 0/05 12/30/09 Meridian Bank 4.80% 99,000 99,000 97,864 (1,136)
.-.
12/28/05 12/28/10 Nat') Bank of New York City 4.90% 97,000 97,000 95,708 (1,292)
1,475,000 1,475,000 1,455,963 (19,037)
MONEY MARKET FUNDS
09130/07 Wells Fargo Government 5.12% 5,354,605 5,354,605 5,354,605
5,354,605 5,354,605 5,354,605 0
6-3
City of Cupertino
September 30, 2007
T LJA I b ~~~.~. AlJJUIS IbLJ I
I T , ,~" KATti . CO~T VALUti YALUti ,~'.~
AGENCY NOTES
04/18/05 10/18/07 FHLB adjustable rate 3.79% 1,500.000 1,500,000 1,499,835 (165)
04/14/04 12/03/07 FNMA callable 2.50% 999,369 1,000,000 995,940 (3,429)
12/13/05 12128/07 FFCB 4.75% 1,000,117 1,000,000 999,380 (737)
04/23/04 01/23/08 FHLB callable 3.15% 1,498,722 1,500,000 1,491,570 (7,152)
02125/04 02125/08 FHLMC 3.13% 1,000,000 1,000,000 992,900 (7,100)
11/21/05 06123/08 FFCB 5.79% 1.007,759 1,000,000 1,007,360 (399)
01/12/04 08/06/08 FHLB callable, step coupon 5.00% 999,650 1,000,000 1,000,310 660
-~..-
04/29/04 10/29/08 FHLB callable, step coupon 4.0QoIo 300,000 300,000 298,968 (1,032)
12/3 0/03 12/30/08 FHLMC callable, step coupon 4.75% 1,000,000 1,000,000 1,002,770 2,770
-"'-"-'-" -,.. ~._., ---
03/16/04 03/16/09 FNMA callable 4.01% 1,600,000 1,600,000 1.588,496 (11.504)
... .. ........_-~-_. ------- ---.-..--------
12128/05 12128/09 FHLB callable 5.04% 915,000 915,000 916,144 1,144
--..--- ..
11130/05 04/07/1 0 FFCB callable 3.70% 970,443 1,000,000 981,880 11,437
------ --'---
11121/05 07/12/10 FHLMC 4.13% 984,994 1,000,000 992,190 7,196
12/15/05 12/15/10 FHLMC callable 5.04% 1,000,000 1,000,000 1,005,520 5,520
04/21/06 04/07/11 FNMA callable 5.75% 748,564 750,000 752,813 4,249
15,524,618 15,565,000 15,526,076 1,458
Total Managed Portfolio 57.150.890 57 191.272 57133.311 l17 579
Average Yield 4,83%
Avenge Length to Maturity (in years) 0.37
TRUST PORTFOLIO (KESTER TRUST)
CASH
09130/07 Wells Institutional Money Mkt Acct 4.83% 45,981 45.981 45,981 0
.-
Total Trust Portfolio 45.981 45,981 45.981 0
BOND RESERVE PORTFOLIO
Bond Reserve Acet Ambac Assurance Security Bond . I I 1
Bond Payment Acet Wells Treasury Plus Money Mkt 4.00% 4,530 4,530 4,530 0
Total Bond Reserve Portfolio 4.530 4.530 4.530 0
6-4
Investments by Type
Managed Portfolio
Agency Notes
27.1%
LAIF
58-6%
CD"
2.6%
IRate of Return Comparison I
4.20%
5.40%
5.20%
5.00%
4.80%
4.60%
4.40%
4.00%
10J06 11106 12/06
1107
2107
3107
4107
5107
6107
7107
8107
9107
6-5
COMPLIANCE WITH INVESTMENT POLICY i
Citr o~ c:~pe~ti~~-_: . ..._-.: ...__~_'~T~:_-':'_~.-__~=~-~--=_=.._._'_~'..':..: =....:==~-_~:=~:==1=_.__ __,_,_,__
Septemb~r 39,_~~~7 .... _ ______ _._.j___..___ ____. ..__.. ___ _.n.' ____ . ____.___ __......:___... ~._._____
i
-. -...... -- --- -...- .. ..... --.- :----.. -.---~.--.-.-- ---.--. -:.-.... .:.. - .. .:. . -..----.- -.:..- ... -.. .-. r'- -. _.n_._ ---
I I
. - t.-. - ..--.--..--- .. .... "0_.. -.----- 'n' ---...--.. -..- :.---.- ___.__...._..1 .-... .--- -_. ---..
Category , Standard I Comment
'1 - .. .-.-...-.-...... . ....n _m ---. -T:. ,,'_"'_""_n__......
Treasury Issues ....- .-___~~:N~-l}~~t- ____... .--.. -. . -- .- .. . .---..lco~p.li~~-.:: ...
US Agencies :No limit ,Complies
.. d. ...._....._. _..... . _....h. "'_0." .. '''__0.'' .1..: -. _ ...
Medium Term Corporate Bonds :3.0% with A rating iComplies
LAIF $40 million .. ...... -- -... '-:c~~pii~~'-"-
. ... _ 0... .- -- .- I' . . . - -.. .
Money Market Funds 20%_ .. ....n_n......_.._..._ _ ____._.~~~~~-
Maximum Maturities . Up to 5 years i Complies
,...n.__ ._._ .. .... ....._nn_.___..___ _._._..__.._.______._........ '-"ih ____O._nn.__
Per Issuer Max : 10% (except for Treasuries and US Agencies) : Complies
. .. ... .... .:. ..-.. .. _...... ... ....-.- -.. .. ..- . ... ..... . ..... 0.__" ...... .... -.- mi.-_-". ........ --.-.
Bankersf.\cceptances : 180 days & 40% . iComplies
Commerci~l Pap~~ ....' .--- -~~-~ __-_~-l~70-~~~.~_~5!~_ =~.:. _-'~:::.'..-.~_.~=-'~:"".:~~~~~_'=~~=_=_1~~~pii~-"""'-
Ne[;otiable Certificates <?f.~~posit__ .l~~~ . ... _ . _.dh.... '. ~c:oml'lie~.. __ .
Repurchase Agreements ;365 days : Complies
.. -.-..-.. ....... .. .. .....__1_._...________.___...... ......-....... ..-.-..-........-.-. ----.--.---..
Reverse Repurchase agreements I Prohibited : Complies
6-6
City of Cuperti~<<? ! : ;
I
General Fund __Budget Report !
-
September 30,2007 1 I i
I I I
I I
! Budeet ! Actual
i 2006/07 2007/08 I 913012006 9/3012007 Analysis of Trends
I
Taxes: I J.
Sales Tax 11,575,000 12,870,000:, ; 1,358,070 2,071,875 Last year's Insight, strong electronic equipment sector
,
Property Tax 6,290,000 6,510,000 26,554 30,479
Transient Occupancy 2,363,000 I 2,550,000 400,160! 449,447
Utility Tax 2,392,000 2,100,000 422,068 463,426
Franchise Fees 2,500,000 2,580,000 111,197 120,162
Other Taxes ! 2,308,000 1,770,000 1 1,021,616 305,090 Construction tax down
Licenses and Pennits i 3,050,000 3,172,0001 965,230 640,909 Decrease in building permits
I
Use of Money & Property i 1,380,000 1,483,0001 I 375,936 421,593 Strong cash position
Intergovernmental 4,706,114 4,740,9651 ! 351,549 175,429 VLF and SB 90 reimbursements down
Charges for Services 1,482,000 2,066,000: : 394,928 303,707 Planning fees down
Fines & Forfeitures 680,000 690,000 I I 51,754 76,463
Other Revenue 140,000 116,2001 42,651 25,374
Sale of Property 1,600,000 i i
Total Revenue 4046fi 1141 40 fi411 lfi~i ! <:""1~ ~ Down 8%
i
Operating Expenditures: I
:
Administrative 1,362,195 1,489,019 280,439 273,659
Law Enforcement 7,177,378 7,865,455 1,735,574 1,906,947: iCorresponds w/budget increase
Community Service 917,644 1,253,677 201,701: 227,752' Corresponds w/budget increase
Administrative Service i 4,978,400 4,410,565 983,671 935,849 Corresponds w/budget decrease
Recreation Service 2,428,298 3,913,113 : i 589,045 847,728 BBF and Senior Center Enterprises this year
Community Development 3,885,441 i 3,868,120 620,271 677,801 N VaHoo Study; Economic Devlpmnt
Public Works 9,845,280 11,025,538 2,006,661 2,181,7771 ! Corresponds w/budget increase
Total Expenditures I 'lO rl'oA ,..,,. 'l'l ll"" All7 hA'~1 7 O~l ~n Up 10%, in line with 11% budget increase
;
,
Transfers In 1,459,974 1,230,0001 250,000 307,500
Transfers Out -7,026,296 -15,648,0001 I -2,303,748 -3,912,000
Net Gain/(Loss) <1 'lO'\ ,<:'" _7 ,\Q<: 'l??i , -" _, C:'7'J n,a
!
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