v . 0 03 P a g e | 1
March 7, 2023
ITEM TITLE
Policy and Investment Report: Acknowledge Receipt of City Council Policy No. 220-01, Delegate Investment Activity Authority to the Director of Finance/Treasurer, and Accept the Investment Report for the Quarter Ending on December 31, 2022
Report Number: 23-0042
Location: No specific geographic location
Department: Finance
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution acknowledging receipt of City Council Policy No. 220 -01 Investment Policy and Guidelines, delegating investment activity authority to the Director of Finance/Treasurer, and accepting the investment report for the quarter ending December 31, 2022.
SUMMARY
Per California Government Code Section 53607, on an annual basis the City Council may delegate to the City Treasurer the authority to conduct the investment activities of the City. And , per Government Code Section 53646, the City Treasurer may annually present the City’s Investment Policy to the City Council to reaffirm or make any changes to the existing policy. The Investment Policy provides guidelines for the investment of idle funds and affords the City various investment opportunities, as long as the investment is deemed prudent and is allowable under Government Code Section 53600, et seq. The Policy was reviewed and adopted by City Council on March 1, 2022. At this time, staff is not recommending any changes to the policy.
Transmitted herewith is the City’s investment report for the quarter ending December 31, 2022. To meet the reporting requirements set forth in the California Government Code Sections 53600 et seq. and the City of Chula Vista Investment Policy and Guidelines, a separate report was distributed to the City Council in January.
P a g e | 2
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
Investment Policy
The City’s Investment Policy and Guidelines was last amended on March 1, 2022 by Resolution 2022 -052 and was intended to provide direction for the prudent investment of temporarily idle cash, and for maximizing the efficiency of the cash management process. The stated goal is to enhance the economic condition of the City while ensuring the safety of funds invested. The policy includes a list of specific investment instruments available under the relevant California Government Code Section 53600 et seq. Each investment transaction is made in the context of first ensuring the “safety” of principal, second, investing only for that timeframe that the cash is not needed for operational purposes (“liquidity”), and last, seeking the highest return possible (“yield”) provided that the first two factors are met.
Per Section 18.0 of the Investment Policy, each fiscal year the Finance Director/Treasurer shall provide a copy of the Policy for adoption by the City Council. At this time, staff is not recommending any changes to the policy.
Quarterly Investment Report
As shown in the below table, the total cash and investment portfolio held by the City as of December 31, 2022, was $587,565,814 and total cash and investments held by the trustees was $116,639,427.
Summary of Cash and Investments as of December 31, 2022 Investments Book Value
Managed Investment Portfolio 518,852,563$
State of California Local Agency Investment Fund 11,862,486 County of San Diego Pooled Investment Fund 23,365,746
Total Investments 554,080,795
Cash/Time Deposits 33,485,019
Total Cash and Investments Held by the City 587,565,814 Cash and Investments Held by Bank Trustee 116,639,427
Total Investment Portfolio 704,205,241$
P a g e | 3
Cash and investments held by the City and the trustees continue to be invested in accordance with the Government Code and the Council Investment Policy as adopted by Resolution 2022-052 on March 1, 2022.
During the quarter, twenty investments matured, totaling $24,994,133. Twenty-three purchases were made to replace those investments and invest idle cash. The new purchases consist of three U.S treasury notes ($9,500,000), five federal agency bonds ($11,00 0,000), eleven corporate notes ($23,195,000), three municipal bonds ($4,520,000), and one certificate of deposit ($249,000).
Two-year Treasuries yielding 4.22% at the beginning of the quarter ended the quarter at a yield of 4.41%.
As of December 31, 2022, the Weighted Yield to Maturity on the Managed Investment Portfolio was 2.05%, which was an increase of twenty -two basis points from the previous quarter. The average yield of the two - year U.S. treasury note over the last twelve months is 3.08% with some of the largest gains occurring over the last four quarters. Purchases are made at current market yields with fixed interest rates.
At the end of this quarter, the Weighted Average Maturity of the Managed Investment Portfolio was 2.06 years, which is a decrease from 2.07 years the prior quarter and is within the Council Policy.
The Federal Open Market Committee (FOMC) meets approximately every six weeks and determines the level of the Federal Funds Rate. During this quarter, the FOMC met on November 2 and De cember 14. At their November 2 meeting, the FOMC voted to raise the Federal Funds Rate target range by 0.75%. At their December 14 meeting, the FOMC voted to raise the Federal Funds Rate target range by 0.50%. The Federal Funds Rate target range had increased to a new range of 4.25%-4.50% by the end of December.
The following excerpts are from the statement issued by the FOMC following their December 14 meeting. “Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
Russia's war against Ukraine is caus ing tremendous human and economic hardship. The war and related events are contributing to upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-1/4 to 4-1/2 percent. The Committee anticipates that ongoing increases in t he target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time…. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” There is no further activity to report other t han routine investments. Considering the projected timing of cash receipts and disbursements and the structure of the Pooled Investment Portfolio, the City will be able to comfortably meet overall cash flow needs over the next six months
P a g e | 4
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov’t Code § 87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
Considering the projected timing of cash receipts and disbursements and the structure of the Pooled Investment Portfolio, the City should be able to comfortably meet overall cash flow needs over the next six months. There is no current-year fiscal impact as a result of this action.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact as a result of this action.
ATTACHMENTS
1. Summary of Cash and Investments as of December 31, 2022
2. Investment Report for the Quarter Ended December 31, 2022
3. Council Policy 220-01 Investment Policy and Guidelines Staff Contact: Sarah Schoen, Director of Finance/Treasurer Adrian Del Rio, Assistant Director, Finance Department