EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: May 16, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Tomohito Oku, Finance Director
Bo-Kyoung Kim, Financial Services Manager
SUBJECT: FY 2022-23 Third Quarter Treasury Report
Recommendation
Accept and file the Treasury Report for the second quarter ended March 31, 2023.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
➢ Ensure Our Financial and Organizational Health
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.
Summary March 31, 2023
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 n/a $ 10,289,389 $ 10,289,389
Local Agency Investment Fund 0.83 1.98% $ 32,944,733 $ 32,500,319 San Mateo County Pool Investment 1.39 1.86% $ 85,981,846 $ 83,695,223 $ 129,226,768 $ 126,495,731
As of March 31, 2023, the total deposit value of cash and investments equals $129,226,768.
The book value of deposits equals $128,909,735, including outstanding checks and other minor adjustments of $316,394. Compared to the prior quarter ending in December 2023, the FY 2022-23 third quarter (Q3) ending on March 31, 2023, total book value balance increased by approximately $8.4M. The overall increase is mainly due to an increase in Housing-in-Lieu Fund cash ($8.0M) attributed to 965 Weeks Street Affordable Housing Development. The following table shows a breakdown of cash and investment balance by fund type.
Deposit Value Market Value
General Fund (Inc. Petty cash of $10,800) $ 26,238,829 $ 26,236,829 General Sub-Funds (Commited/Reserved) $ 19,226,617 $ 19,226,617 City Funds Restricted and Committed $ 80,107,783 $ 80,107,783 Successor Agency Trust $ 3,338,505 $ 3,338,505
Unrealized Gain on Investment Pools $ - $ (2,731,037)
$ 128,911,735 $ 126,178,698
Summary March 31, 2023
The book market value totals $126,178,698, including an unrealized loss of $2,731,037, reflecting treasury yields during the calendar year. All except for General Fund balance is restricted by either City Council or external parties for specific purposes. Unrestricted cash and investment balance under General Fund ($26,236,829) may be used at Council discretion.
The table below reflects changes in rates since March 31, 2022, and compared to the previous month of February 2023, demonstrating an increase in long-term Treasury yields but a decrease in short-term yields since March 31, 2022, across the curve1:
Mar-23 Feb-23 Mar-22
6-month Treasury Bill 4.72 4.93 1.02
2-year Treasury Note 4.06 4.81 2.28
5-Year Treasury Note 3.60 4.18 2.42
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 1 Daily Treasury Yield Curve Rates, Treasury.gov
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. December to March over quarter LAIF yields increased from 1.98% to 2.63% and San Mateo County Pool average gross pool earnings increased from 1.861% to 2.054%. San Mateo County Pool earnings are quoted on gross earnings. Both LAIF and the County Pool fair value factors in the third quarter have increased from 0.9814 to 0.9865 and from 0.9679 to 0.9734, respectively, compared to the previous quarter. This is mainly due to the decrease trend in average Treasury yields during the third quarter.
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.
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 proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Treasury Report QE Mar-23