EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: February 15, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Tomohito Oku, Finance Director
SUBJECT: FY21-22 Q2 Treasury Report
Recommendation
Accept and file the Treasury Report for the Second quarter ended December 31, 2021.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Ø Priority #3: Increase Organizational Effectiveness and Efficiency Ø Priority #5: Improve Communication and Enhance Community Engagement Background
Pursuant to Section 53646 of the Government Code of the State of California, the City Treasurer may submit a quarterly report to the City Council regarding the funds and investments of the City. The Finance staff provides quarterly reporting to the City Council indicating the summary of investments for the period and denoting the ability of the City to meet its expenditure requirements for the next three months.
Analysis
This report covers primary cash and investments of the City. For investment purposes, City cash is pooled, except for bond proceeds, which are held by a trustee. The City does not have, nor is it legally required to have, separate bank accounts for each individual fund. However, all cash is segregated in the City’s accounting records.
As of December 31, 2021, the total deposit value of cash and investments equals $108,362,634. The book value of deposits equals $107,784,492 including outstanding checks and other minor adjustments of $565,778. The book market value totals $107,671,954 including an unrealized loss of $112,998 reflecting overall increases in treasury yields during the calendar year.
Summary December 31, 2021
Average
Maturity
(YRS)
Average
Earnings
(QTR)
Deposit and
Book Value Market Value
Petty Cash n/a n/a $ 10,800 $ 10,800
Bank Checking n/a 0.05% $ 3,246,521 $ 3,246,521
Local Agency Investment Fund 0.93 0.21% $ 9,999,624 $ 9,974,016 San Mateo County Pool Investment 1.60 0.96% $ 95,105,689 $ 95,018,308 $ 108,362,634 $ 108,249,646
The table below reflects changes in rates since December 31, 2020 and compared to the previous month of November 2021 demonstrating an increase in both short-term and long-term Treasury yields from November 30, 2021 as well as from a year ago steepening of longer term yields across the curve.:
Dec-21 Nov-21 Dec-20
6-month Treasury Bill 0.19 0.10 0.09
2-year Treasury Note 0.73 0.52 0.13
5-Year Treasury Note 1.26 1.14 0.36
Compared to the prior quarter ended in September 2021, the FY 2021-22 second quarter (Q2) ending on December 31, 2021 total book value balance increased approximately $4.3M. The overall increase is mainly due to an increase in General Fund cash ($3.6M) attributed to approximately $8 million property tax revenue receipts in December.
The City’s portfolio is invested in the Local Agency Investment Fund (LAIF) and the San Mateo County Treasurer’s Pool. LAIF is a highly liquid investment pool operated by the State Treasurer, and the City has same-day access to the funds. The County Treasurer’s Pool is less liquid, and the maturity and diversification of the underlying securities which in normally functioning markets is generally expected to result in higher yield. City staff does not control or direct the underlying investment of funds and each pool is managed by the respective agency’s investment staff and oversight committee or board. September to December over quarter LAIF yields decreased from 0.22% to 0.21% and San Mateo County Pool average gross pool earnings decreased from 1.083% to 0.958%. San Mateo County Pool earnings are quoted on gross earnings.
Both LAIF and the County Pool fair value factors in the second quarter have dropped from
0.9999 to 0.9974 and from 1.0020 to 0.9991, respectively compared to the previous quarter.
This is mainly due to the increase trend in Treasury yields indicated in the table above.
Pursuant to California Government Code 53646 the City shall meet its expenditure requirements for the next six months.
Fiscal Impact
This report is informational.
Attachments
1. Schedule A - Treasury Report QE Dec-21