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November 12, 2024
ITEM TITLE
Investment Report: Quarter Ending September 30, 2024
Report Number: 24-0271
Location: No specific geographic location
Department: Finance
G.C. § 84308: No
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
Receive the investment report for the quarter ending on September 30, 2024.
SUMMARY
Transmitted herewith is the City’s investment report for the quarter ending September 30, 2024 to meet the reporting requirements set forth in the California Government Code Sections 53600 et seq. and City Council Policy 220-01 Investment Policy and Guidelines.
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 resu lt 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.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
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DISCUSSION
As shown in the table below, th e total cash and investment portfolio held by the City as of September 30, 2024, was $658,810,559 and total cash and investments held by the trustees were $92,020,613.
Summary of Cash and Investments as of September 30, 2024 Cash and Investments Book Value
Managed Investment Portfolio $ 618,495,574 State of California Local Agency Investment Fund 5,440,111 County of San Diego Pooled Investment Fund 23,938 Total Investments Held by the City 623,959,623 Cash/Time Deposits 34,850,936
Total Cash and Investments Held by the City 658,810,559
Cash and Investments Held by Bank Trustee 92,020,613 Total Cash and Investment Portfolio $ 750,831,172
Cash and investments held by the City and the trustees continue to be invested in accordance with the Government Code and City Council Policy 220-01 Investment Policy and Guidelines as adopted by Resolution No. 2024-023 on February 13, 2024.
During the quarter, $ 29,000,000 was transferred from Bank of New York, the City’s Investment Custodian Bank account, and $25,000,000 from the State of California Local Agency Investment Fund (LAIF ), pooled investment account, to the City . These funds were used to maintain adequate cashflows during the quarter which is typical for this time of the fiscal year. Additionally, 49 investments matured, totaling $96,279,000 and three investments were sold, totaling $14,374,000 . 11 purchases were made to replace those investments. Purchased investments include: three corporate notes ($22, 500,000) and eight U.S. treasury notes ($57,900,000). The Finance Department continues to manage the portfolio and execute transactions as financial and economic conditions warrant. There is no further activity to report other than routine investments.
Two-year Treasuries were yielding 4.71% at the beginning of the quarter and ended the quarter at a yield of
3.66%. As of September 30, 2024, the Weighted Yield to Maturity on the Managed Investment Portfolio was
3.62%, which was an increase of 18 basis points from the previous quarter. The average yield of the two - year U.S. treasury note over t he last twelve months is 4.50%. 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 1.91 years, which is an increase from 1.80 years from the prior quarter.
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 July 30 and September 17. At their September 17 meeting, the FOMC voted to lower the Federal Funds Rate target range. The Federal Funds Rate target range is 4.75%-5.00%.
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The following excerpts are from the statement issued by the FOMC following their September 17 meeting. "Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate. In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the fe deral funds rate by 1/2 percentage point to 4- 3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks....In as sessing 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 eme rge 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 labor market conditions, inflation pressures and inflation expectations, and financial and international developments." The Finance Department, with the assistance of Chandler Asset Management, Inc, continues to manage the City’s investment portfolio in accordance with the Government Code and City Council Policy 220 -01 Investment Policy and Guidelines. 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.
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 direct 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 September 30, 2024
2. Investment Report for the Quarter Ended September 30, 2024 P a g e | 4
Staff Contact: Galen Fleming, Fiscal Services Analyst, Finance Department Sarah Schoen, Director of Finance/Treasurer