EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: November 15, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Patrick Heisinger, Interim City Manager
BY: Tomohito Oku, Finance Director
Bo-Kyoung Kim, Financial Services Manager
SUBJECT: FY2022-23 First Quarter Treasury Report
Recommendation
Accept and file the Treasury Report for the first quarter ended September 30, 2022 Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 3: Increase Organizational Effectiveness and Efficiency Priority No. 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 September 30, 2022, the total deposit value of cash and investments equals $113,449,132. The book value of deposits equals $112,653,412 including outstanding checks and other minor adjustments of $795,720. Compared to the prior quarter ending in June 2022, the FY 2022-23 first quarter (Q1) ending on September 30, 2022, total book value balance decreased by approximately $3.4M. The overall decrease is mainly due to a decrease in General Sub-Fund cash ($1.5M) attributed to approximately $1.2 million in General Liability member contributions ($0.8M) and in SFCJPA contribution ($0.4), and also a decrease in Successor Agency Fund cash ($1.3M) attributed to Principal and Interest payment.
Summary September 30, 2022
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 2.70% $ 2,358,222 $ 2,358,222
Local Agency Investment Fund 0.83 1.29% $ 10,032,012 $ 9,839,006 San Mateo County Pool Investment 1.39 1.37% $ 101,048,098 $ 96,890,649 $ 113,449,132 $ 109,098,677
The book market value totals $108,302,957 including an unrealized loss of $4,350,455 reflecting overall increases in treasury yields during the calendar year. The table below reflects changes in rates since September 30, 2021, and compared to the previous month of August 2022 demonstrating an increase in both short-term and long-term Treasury yields since September 30, 2021, across the curve.1:
Sep-22 Aug-22 Sep-21
6-month Treasury Bill 3.82 3.25 0.05
2-year Treasury Note 4.22 3.45 0.28
5-Year Treasury Note 4.06 3.30 0.98
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. June to September over quarter LAIF yields increased from 0.69% to 1.29% and San Mateo County Pool average gross pool earnings increased from 1.083% to 1.374%. San Mateo County Pool earnings are quoted on gross earnings.
Both LAIF and the County Pool fair value factors in the first quarter have dropped from 0.9871 to 0.9808 and from 0.9688 to 0.9589, 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.
1 Daily Treasury Yield Curve Rates, Treasury.gov
Fiscal Impact
This report is informational.
Attachments
A. Schedule A - Treasury Report QE Sep-22