Date: May 14, 2024
To: MAYOR AND CITY COUNCIL
From: EUGENE SOLOMON, CITY TREASURER
Subject: CITY TREASURER’S THIRD QUARTER 2023-24 REPORT
EXECUTIVE SUMMARY
The City Treasurer maintains the City’s cash flows while earning a competitive rate of return on the Investments within the constraints of the City’s investment policy and state law. This City Treasurer’s report for the third quarter of fiscal year 2023-2024, details the composition of the investment portfolio and investment transactions occurring during the period of January through March of 2024. Meeder Investment serves as investment advisor to the City Treasurer. The Meeder Investment report with this package includes a comprehensive analysis of the City’s investment portfolio and investment market trends.
Notable sections of this report include:
• Treasurer’s Portfolio Summary
• Investment Reporting Guidelines
• Investment Report by Meeder Investment
o Portfolio Summary
o Investment Policy Compliance Report
o Investment Activity Report
o Economic and Market Update
City Treasurer’s Portfolio Summary
The market value of the City’s general investment portfolio changed to $100.8MM from $97.9MM at the end of the prior quarter. This change in the investment portfolio resulted from anticipated fluctuations within the cash flow trends on both general operations and capital improvement program revenue and spending.
Investment portfolio liquidity is 39.18% of the portfolio having maturities of one year or less. The Bank of America General Fund Checking Account ending balance was $11,755,717.33. It earned a rate of 3.75%, to offset the expenses of banking support services.
Administrative Report
QOQ Comparison of Investment Portfolio Positions
Portfolio positions at the end of each quarter are listed by investment type, dollar amount, and percentage mix of the overall general investment portfolio:
Composition of Portfolio 2018-Present
Comparison of Investment Portfolio Positions
FY 2023-2024
FY 2022-2023
Investment Type %
Cash in Banks $6,469,818 * 13,256,219 * $11,755,717 *
Money Market $8,733,993 8.78% $19,612,340 19.53% $15,881,678 15.37% Local Agency Investment Fund $98,106 10.00% $100,842 0.10% $101,853 0.10% Federal Agency Issues $49,969,031 50.24% $48,017,978 47.81% $48,066,986 46.52% Commercial Paper $0 0.00% $0 0.00% $0 0.00%
Corporate Medium Term Notes $6,905,358 6.94% $2,921,402 2.91% $4,468,652 4.32% Bank Certificates of Deposit $991,797 1.00% $991,856 0.99% $991,914 0.96% Treasuries $32,755,612 32.94% $28,785,152 28.66% $33,811,331 32.72% Total: Investment Portfolio $99,453,897 100% $100,429,570 100.0% $103,322,415 100.00% Weighted Average Maturity (Yrs) 1.96 1.73 1.54
Portfolio Effective Rate of Return (YTD) 2.82% 2.96% 2.71% L.A.I.F. Yield 3.55% 3.93% 4.25%
Yield on Benchmark 2.66% 3.10% 3.53%
Interest earned YTD $675,178.00 $1,260,353.00 $2,023,050 General Fund Contribution (60%) $405,107 $756,212 $1,213,830 Comparison of Investment Portfolio Positions F.Y. 2023-2024 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Investment Type %
Cash in Banks $10,955,229 * 9,223,658 * $6,359,470 * $ 9,742,075 * Money Market $0 0.0% $5,149,678 4.38% $13,392,052 11.33% $ 8,931,843 7.80% Local Agency Investment Fund $16,071,480 14.5% $27,137,556 23.1% $5,225,372 4.42% $ 1,087,813 0.95% Federal Agency Issues $53,439,957 48.3% $47,448,367 40.4% $56,867,881 48.12% $ 56,918,780 49.70% Commercial Paper $0 0.0% $0 0.0% $0 0.00% $0 0.00%
Corporate Medium Term Notes $6,981,521 6.3% $8,847,387 7.5% $8,866,737 7.50% $ 8,885,872 7.76% Bank Certificates of Deposit $1,239,564 1.1% $991,622 0.8% $991,680 0.84% $ 991,738 0.87% Treasuries $32,895,368 29.7% $27,910,842 23.8% $32,831,737 27.78% $ 37,713,483 32.93% Total: Investment Portfolio $110,627,890 100% $117,485,452 100.0% $118,175,459 100.00% $ 114,529,529 100.00% Weighted Average Maturity (Yrs) 1.99 1.72 1.97 1.91
Portfolio Effective Rate of Return (YTD) 1.51% 1.71% 2.10% 2.29% L.A.I.F. Yield 1.60% 2.17% 2.83% 3.17%
Yield on Benchmark 0.97% 1.38% 1.76% 2.19%
Interest earned YTD $425,011.78 $952,194.05 $1,695,368 $2,435,724 General Fund Contribution (60%) $255,007 $571,316.00 $1,017,221 $1,461,434.40 Comparison of Investment Portfolio Positions F.Y. 2022-2023 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
FY 2021-2022
FY 2020-2021
Investment Type % % %
Cash in Banks & Money Markets $11,834,546 * $11,833,288 * $14,063,300 * $ 15,087,417 * Local Agency Investment Fund $9,000,500 10.7% $20,012,320 21.9% $20,018,196 20.81% $ 20,033,972 18.43% Federal Agency Issues $30,579,369 36.3% $30,574,250 33.5% $40,569,151 42.18% $ 45,564,006 41.92% Commercial Paper $0 0.0% $0 0.0% $0 0.00% $0 0.00%
Corporate Medium Term Notes $15,948,457 19.0% $15,957,757 17.5% $10,963,900 11.40% $ 8,974,595 8.26% Bank Certificates of Deposit $1,735,250 2.1% $1,735,339 1.9% $1,735,425 1.80% $ 1,239,505 1.14% Treasuries $26,896,065 32.0% $22,894,191 25.1% $22,899,581 23.81% $ 32,878,387 30.25% Total: Investment Portfolio $84,159,641 100% $91,173,857 100.0% $96,186,253 100.00% $ 108,690,464 100.00% Weighted Average Maturity (Yrs) 2.06 1.81 2.03 1.92
Portfolio Effective Rate of Return (YTD) 2.24% 1.90% 1.53% 1.47% L.A.I.F. Yield 0.21% 0.21% 0.22% 0.86%
Yield on Benchmark 0.76% 0.62% 0.59% 0.68%
Interest earned YTD $497,915.05 $817,147 $1,021,840 $1,342,113 General Fund Contribution (60%) $298,749 $490,288 $613,104 $805,267.80 Comparison of Investment Portfolio Positions F.Y. 2021-2022 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Investment Type % %
Cash in Banks & Money Markets $10,855,843 * $10,000,681 * $5,180,168 * $ 10,538,424 * Local Agency Investment Fund $7,004,742 9.6% $15,028,642 19.7% $15,039,065 18.30% $ 23,055,498 26.1% Federal Agency Issues $34,598,183 47.2% $34,593,480 45.3% $34,588,776 42.00% $ 30,054,073 34.7% Commercial Paper $0 0.0% $0 0.0% $0 0.00% $0 0.0%
Corporate Medium Term Notes $20,903,182 28.5% $20,915,171 27.4% $21,927,159 26.70% $ 18,937,844 21.5% Bank Certificates of Deposit $2,726,898 3.7% $1,734,986 2.3% $1,735,073 2.10% $ 1,735,161 2.0% Treasuries $8,053,427 11.0% $4,041,832 5.3% $8,985,108 10.90% $ 13,890,876 15.7% Total: Investment Portfolio $73,286,432 100.0% $76,314,111 100.0% $82,275,181 100.00% $ 88,203,451 100.0% Weighted Average Maturity (Yrs) 1.97 1.68 1.69 1.63
Portfolio Effective Rate of Return (YTD) 2.10% 2.12% 2.07% 2.00% L.A.I.F. Yield 0.68% 0.54% 0.36% 0.26%
Yield on Benchmark 1.67% 1.45% 1.21% 0.97%
Interest earned YTD $430,578.83 $815,051 $1,198,761 $1,574,081 General Fund Contribution (49%) $210,984 $399,375 $587,393 $771,300 Comparison of Investment Portfolio Positions F.Y. 2020-2021 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
FY 2019-2020
FY 2018-2019
Investment Type % % % %
Cash in Banks & Money Markets $8,004,405 * $10,421,483 * $5,306,333 * $ 9,193,009 * Local Agency Investment Fund $7,000,000 8.3% $17,052,131 19.7% $14,000,000 15.40% $ 22,000,000 23.3% Federal Agency Issues $41,455,587 49.1% $35,460,741 40.9% $40,606,033 44.70% $ 38,602,882 40.8% Commercial Paper
Corporate Medium Term Notes $24,837,904 29.4% $22,851,300 26.4% $22,865,644 25.20% $ 20,891,194 22.1% Bank Certificates of Deposit $3,223,020 3.8% $3,222,544 3.7% $3,222,661 3.60% $ 2,974,779 3.1% Treasuries $7,994,458 9.5% $8,041,480 9.3% $10,073,719 11.10% $ 10,063,635 10.6% Total: Investment Portfolio $84,510,969 100.0% $86,628,195 100.0% $90,768,058 100.00% $ 94,532,490 100.0% Weighted Average Maturity (Yrs) 2.1 1.89 2.02 1.72
Portfolio Effective Rate of Return (YTD) 2.23% 2.27% 2.26% 2.22% L.A.I.F. Yield 2.28% 2.04% 1.79% 1.20%
Yield on Benchmark 2.06% 2.08% 2.06% 2.02%
Interest earned YTD $502,505.00 $973,145 $1,483,028 $1,965,199 General Fund Contribution (44%) $221,102 $428,184 $652,532 $864,688 Comparison of Investment Portfolio Positions F.Y. 2019-2020 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Investment Type % % % %
Cash in Banks & Money Markets $8,761,921 * $6,939,956 * $5,394,950 * $ 9,062,598 * Local Agency Investment Fund $1,000,000 1.3% $16,000,000 18.5% $6,000,000 6.60% $ 10,000,000 10.0% Federal Agency Issues $46,940,821 59.7% $44,893,166 51.9% $44,394,491 49.20% $ 44,448,469 44.2% Commercial Paper $3,973,074 4.30% $ 3,998,729 4.0%
Corporate Medium Term Notes $12,951,519 16.5% $11,958,712 13.8% $22,801,156 24.90% $ 26,821,710 26.7% Bank Certificates of Deposit $1,735,760 2.2% $1,735,790 2.0% $1,735,820 1.90% $ 3,222,931 3.2% Treasuries $15,938,992 20.3% $11,956,768 13.8% $11,973,607 13.10% $ 11,990,633 11.9% Total: Investment Portfolio $78,567,092 100.0% $86,544,436 100.0% $91,418,148 100.00% $ 100,482,471 100.0% Weighted Average Maturity (Yrs) 1.73 1.51 1.95 1.81
Portfolio Effective Rate of Return (YTD) 1.70% 1.77% 1.92% 2.01% L.A.I.F. Yield 1.94% 2.29% 2.39% 2.43%
Yield on Benchmark 1.68% 1.59% 1.68% 1.76%
Interest earned YTD $357,684.00 $726,249 $1,215,976 $1,765,752 General Fund Contribution (66%) $236,071 $479,324 $802,544.16 $1,165,396 Comparison of Investment Portfolio Positions F.Y. 2018-2019 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Comparison of Total Cash and Investments
2018-Present
Investments General Fund Subtotal Other Cash Total
2023-
2024 $ MM $ MM $ MM $ MM $ MM
Q3 103.32 11.76 115.08 11.89 126.97
Q2 100.43 13.26 113.69 10.66 124.35
Q1 99.45 6.47 105.92 10.65 116.57
2022-
2023 $ MM $ MM $ MM $ MM $ MM
Q1 110.63 10.96 121.59 9.33 130.92
Q2 117.49 9.22 126.71 9.44 136.15
Q3 118.18 6.36 124.54 10.25 134.79
Q4 114.53 9.74 124.27 10.15 134.42
2021-
2022 $ MM $ MM $ MM $ MM $ MM
Q1 84.16 11.83 95.99 8.65 104.64
Q2 91.17 11.83 103 8.61 111.61
Q3 96.19 14.06 110.25 9.12 119.37
Q4 108.69 15.09 123.78 8.99 132.77
2020-
2021 $ MM $ MM $ MM $ MM $ MM
Q1 73.29 10.86 84.15 6.81 90.96
Q2 76.31 10.00 86.31 7.02 93.33
Q3 82.28 5.18 87.46 7.59 95.05
Q4 88.20 10.54 98.74 7.84 106.58
2019-
2020 $ MM $ MM $ MM $ MM $ MM
Q1 84.51 8.00 92.51 5.86 98.37
Q2 86.63 10.42 97.05 6.64 103.69
Q3 90.77 5.31 96.08 7.63 103.71
Q4 94.53 9.19 103.72 7.35 111.07
2018-
2019 $ MM $ MM $ MM $ MM $ MM
Q1 78.57 8.76 87.33 5.95 93.28
Q2 86.54 6.94 93.48 5.93 99.41
Q3 91.42 5.39 96.81 6.73 103.54
Q4 100.48 9.06 109.54 4.95 114.49
Yields: The book yield of the portfolio is 3.07%. The effective rate of return for the fiscal year to date is 2.71%. The book yield is a snapshot on a specific day whereas the effective rate of return is annualized return generated for the period.
Investment Portfolio Performance vs. Benchmark: At the end of the quarter, the yield on the City’s general investment portfolio was 3.07%. This yield provided a 46 basis point disadvantage to the yield provided by the investment portfolio benchmark, U.S. Treasury Note 0-5 year index (30 month moving average), which yielded 3.53%. The 30 month moving average is used to represent a market rate of return.
Mark to Market: The City Treasurer compares market values of the portfolio holdings to their original cost. At the close of the quarter, the net asset value is $0.98. That means the Market Value is slightly below the cost of investments. The difference between the book value (cost) of investments at $103,322,414 and the current market value at $100,797,025 is $-2,525,390.
Cash in Banks:
As of 3/31/2024
General Fund $11,755,717.33
Workmen’s Compensation Fund $1,494,498.06
Successor Agency of RDA $1,215,211.42
Trust Account $7,614.40
Housing Authority BLKPNDG $3,063,875.97
Financing Authority $4,260,340.68
Parking Authority $1004.70
Measure R Local Return $1,736,775.40
City of Redondo Beach - FSA $109,441.80
Total $23,644,479.76
All Agency, Authority and Miscellaneous Funds in Banks
Bank Account Descriptions
General Fund - 201
Into the City’s general checking account are deposited most of the City’s revenue, including General Fund taxes, grant revenue (with the exception of that for the Housing Authority), Harbor Enterprise rental income, and sewer fees. From the general checking account are automatic transfers to the payroll and warrant accounts (as payments clear the bank) and purchases of investments.
Workmen’s Compensation Fund - 210
A Bank of America checking account has been established for the payment of workers’ compensation claims. The City’s third party administrator, AdminSure, writes the checks from this account on the City’s behalf. Monthly, the City replenishes the account with a City Council approved accounts payable check.
Successor Agency of RDA - 213 / Successor Agency of RDA - 694 The Successor Agency to the former Redevelopment Agency maintains both a Bank of America checking account (with a larger balance) and a Bank of America interest checking account (with a smaller balance). A few years ago, the bank changed the accounts to this structure from a checking account and a savings account. The checking account activity reflects biannual deposits of Redevelopment Property Tax Trust Fund (RPTTF) revenue as a result of the Recognized Obligation Payment Schedule (ROPS) process whereby the City reports to the Department of Finance the amount of funding necessary to make its Redevelopment Agency debt service payments (together with the applicable administrative costs). Those debt service payments are then made from this checking account, and the administrative cost reimbursement is transferred to the City’s general checking account. The activity in the interest checking account is currently only deposits of interest earned.
Trust Account - 212
The Police Department deposits bail money into this checking account and then transfers these funds to the courts by way of checks. The balance of the account has been $7,364.40 for several years, but it could be higher at the end of the month/quarter if a check is outstanding at the time.
Housing Authority – 207/Housing Authority – 023
The Housing Authority maintains both a checking account and a government money market savings account. Into the checking account are deposited grant funds from HUD for operation of the Fair Housing and Section 8 housing programs. Payments to landlords are then made monthly from this account, and periodically a check is written to the City as reimbursement for administrative costs paid by the City on the Housing Authority’s behalf. The activity in the government money market savings account is currently only deposits of interest earned.
Financing Authority -168
The Community Financing Authority (CFA), a joint powers authority of the City and the Parking Authority, was formed January 31, 2012 when the Kincaid’s Restaurant lease was transferred from the Public Financing Authority (PFA), a joint powers authority of the City and the Redevelopment Agency, upon the Redevelopment Agency’s elimination by the State. The Financing Authority checking account is used for the lease-related transactions, including rental income, loan payments, sewer user fees, and possessory interest property tax payments.
Parking Authority - 675
The Parking Authority was established on March 3, 1969, pursuant to the provisions of the Streets and Highway Code of the State of California. Its primary purpose has been to provide public off-street parking within the City. The Parking Authority is currently inactive with a little more than $5,000 remaining in a Bank of America interest checking account and a little less than $5,000 remaining in a LAIF account from its previous activities.
Measure R Local Return - 874
Measure R monies come from a 2008 voter-approved ½ cent sales tax levied within Los Angeles County for public transportation purposes. Per a Los Angeles County Metropolitan Transportation Authority (LACMTA) audit recommendation, Measure R monies are to be maintained in a separate bank account. Because expenditures from the Measure R Fund (primarily for capital improvement projects) are paid through the City’s accounts payable system and “General Fund” bank account, this separate Measure R Local Return interest checking account is funded by periodic transfers from the “General Fund” bank account instead of Measure R monies deposited directly to the account.
City of Redondo Beach – FSA - 825
The City contracts with Sterling to offer its employees Flexible Spending Accounts (FSAs) which allow the employees to set aside, before taxes, a portion of their yearly income to pay for qualified medical and/or dependent care expenses. These funds withheld from the employees’ paychecks are transferred to this separate checking account each pay period. The medical and dependent care expenses are then paid by Sterling from this account.
LAIF Balances:
LAIF ACCOUNTS March 2024
ACCOUNT NAMES
GENERAL ACCOUNT $ 101,853.15
SUCCESSOR AGENCY FOR RDA $ 1,945,797.93
PUBLIC FINANCING AUTHORITY $ 185,666.33
PARKING AUTHORITY $ 5,389.83
Total: $ 2,238,707.24
Trading Activity
During the quarter, the City purchased two securities. Also, one security was redeemed.
Fiscal Impact
Interest earned year to date is $2,023,050 for the entire portfolio. The General Fund contribution rate of our investment portfolio is approximately 60% of the total interest earned thus contributing approximately $1,213,830 to the General Fund through investment activity. Budgeted contribution of interest to the general fund for the entire fiscal year is $1,500,000.
Investment Reporting Guidelines
Please note the following guidelines from the Government Finance Officers Association Financial Management Checklists for Elected Officials.
Always remember whose money it is (it’s the community’s, not yours)—and act accordingly in a responsible stewardship capacity.
The generally accepted objectives in managing public funds, in priority order, are:
• Safety
• Liquidity
• Yield
An investment manager’s objective is to earn a reasonable rate of return on the city’s investments, while preserving capital in the overall portfolio. It should never be an investment manager’s goal to earn maximum returns on the city’s portfolio as this would expose the city to an unacceptable level of risk. Failures in public investing occur when either:
• Policies were not clear.
• Policies were inappropriate.
• Policies were not followed.
• Oversight was inadequate.
Questions to Ask:
• Do you review the investment policy?
• Do you understand the city’s investment program?
• Do you receive and review periodic investment reports? • Are they clear, concise? Are they readable? Do you fully understand them? (If you can’t, this is more likely to be because they’ve been presented poorly, and may in fact reflect problems, than any “technical” problems with your ability to understand them because it’s too “complex.” First, it’s the job of your staff to make them readable and understandable; and secondly, if the city’s portfolio is genuinely that complex, perhaps it shouldn’t be.)
• Are there lots of investments and transactions? Why? Most cities do not have portfolios that justify “active” management with lots of sales, purchases and trades.
• Are your investments diversified? Or have you placed “all of your eggs in one basket?”
• What ongoing oversight is there? By whom?
Submitted by:
Eugene Solomon, City Treasurer