Agenda Report
Fullerton City Council
MEETING DATE: November 15, 2022
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: Ellis chang, director of administrative services PREPARED BY: Ellis chang, director of administrative services SUBJECT: ADDITIONAL CONTRIBUTION TO enhanced cash portfolio
SUMMARY
To inform City Council of an additional $20 million contribution to the City’s Enhanced Cash Portfolio. City Treasurer / Director of Administrative Services will transfer funds from the state Local Agency Investment Fund (LAIF) to the Enhanced Cash Portfolio managed by Public Trust Advisors to increase returns without impact to safety or liquidity.
RECOMMENDATION
Receive and file.
CITY MANAGER REMARKS
None.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Fiscal and Organizational Stability.
FISCAL IMPACT
The cost of investing in the enhanced cash portfolio with Public Trust Advisors which primarily invests in US Treasuries is four (0.04%) basis points, $400 annually for each million invested. Staff anticipates returns net of cost to be higher than investment in LAIF. The $30 million investment in the enhanced cash portfolio will remain short in duration at three- and six-month maturities with ongoing laddering assessed at each maturity as US Treasury returns are currently higher than returns currently provided in LAIF.
DISCUSSION
City Council ratified investment in and authorized the City Treasurer / Director of Administrative Services to manage and administer the enhanced cash portfolio in May 2022. The City Treasurer began with an initial $10 million investment and will increase the investment with an additional $20 million transfer from LAIF, as recommended by the Investment Advisory Committee. This provides an opportunity to further diversify the investment program and potentially provide higher income by investing in short term fixed income securities offering yields of more than 200 basis points (2.0%) higher than the October LAIF rate. Net earnings totaled approximately $19,000 during this initial period, in line with expectations of initial securities with yields of 14 – 37 basis points higher than LAIF at the time of purchase.
While actual yields and earnings will depend on rates and maturities at time of purchase and as it is unknown when LAIF rates will increase or surpass US Treasury rates, the enhanced cash portfolio enables the City to take advantage of this spread. The City Treasurer will continue to work with the City’s investment advisory firm Public Trust Advisors to monitor and manage the investment in the enhanced cash portfolio along with all temporarily idle cash and operating capital. At such time that LAIF rates adjust upwards exceeding US Treasury returns, the City Treasury will transfer matured funds from the enhanced cash portfolio back to LAIF.
Ongoing quarterly updates to both the Investment Advisory Committee and City Council will include the enhanced cash portfolio along will all City investments. cc: City Manager Eric J. Levitt
Additional Contribution to Enhanced Cash Portfolio
November 15, 2022 - Page 2