EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: February 21, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin Gaines, City Manager
BY: Tomohito Oku, Finance Director
Bo-Kyoung Kim, Financial Services Manager
SUBJECT: FY 2022-23 Second Quarter Treasury Report
Recommendation
Accept and file the Treasury Report for the second quarter ended December 31, 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. 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 in trust 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, 2022, the total deposit value of cash and investments equals $122,278,718. The book value of deposits equals $120,516,038, including outstanding checks and other minor adjustments of $1,762,680. Compared to the prior quarter ending in September 2022, the FY 2022-23 second quarter (Q2) ending on December 31, 2022, total book value balance increased by approximately $7.9M. The overall increase is mainly due to an increase in General Fund cash ($5.4M) attributed to general property tax ($3.5M) and vehicle license fee ($2.6M) offset by various expenditures, and also an increase in Garbage Collection Fund cash ($1.37M) distributed in December 2022.
Summary December 31, 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 4.20% $ 4,050,749 $ 4,050,749
Local Agency Investment Fund 0.83 1.98% $ 10,066,147 $ 9,878,809 San Mateo County Pool Investment 1.39 1.86% $ 108,151,021 $ 104,674,098 $ 122,278,718 $ 118,614,456
The book market value totals $116,851,776, including an unrealized loss of $3,664,262, reflecting treasury yields during the calendar year. The table below reflects changes in rates since December 31, 2021, and compared to the previous month of November 2022, demonstrating an increase in both short-term and long-term Treasury yields since December 31, 2021, across the curve.1:
Dec-22 Nov-22 Dec-21
6-month Treasury Bill 4.60 4.54 0.19
2-year Treasury Note 4.41 4.38 0.73
5-Year Treasury Note 3.99 3.82 1.26
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 increased from 1.29% to 1.98% and San Mateo County Pool average gross pool earnings increased from 1.374% to 1.861%. 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
0.9808 to 0.9814 and from 0.9589 to 0.9679, respectively compared to the previous quarter.
This is mainly due to the increase trend in Treasury yields indicated in the table above.
Based on the foregoing, pursuant to California Government Code Section 53646, the City shall meet its expenditure requirements for the next six months.
Fiscal Impact
This report is informational.
1 Daily Treasury Yield Curve Rates, Treasury.gov
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because it is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.