City Council
259 N. Wilma Avenue
Ripon, CA 95366
MEMO
To: Honorable City Council
From: Lisa Roos, City Clerk & Finance Director
Date: 08/13/2024
Subject: Annual Investment Report Review
RECOMMENDED ACTION:
Accept the City’s annual investment report for the period ending June 30, 2024.
BACKGROUND:
The following report is the City’s annual investment report for the period ending June 30, 2024.
This report summarizes:
City’s investment policy that was adopted by the Council in 1996 and amended in 2003 and in 2023
Average interest rate for the last 12 months for all City investments List of individual investments with balances and interest rates as of the end of the period.
The interest rates that are shown in the report are for the most recent 12-month period.
The City maintains money in both shorter-term daily liquidity investments, such as LAIF, and longer-term investments held at the Bank of New York. The shorter-term investments allow the City to earn interest, which is normally lower than the interest from longer-term investments, while the funds remain liquid and can quickly be transferred from time to time to cover operational costs of the City throughout the year.
In May 2023, the City added California Asset Management Program (CAMP) as a short-term investment option. Within CAMP, the City can invest in liquid funds or in term funds. Term funds have a set maturity date and interest rate, which allows the City to take advantage of higher rates on funds that are not needed as liquid funds. However, interest is not received until maturity on these Term funds.
The investments held at the Bank of New York have longer durations, as such, our goal is to normally not access the funds for liquidity purposes. It is not uncommon during federal tightening cycles for money market funds and pools similar to LAIF to have yields that surpass longer duration portfolios such as the investments held at the Bank of New York. CAMP has a shorter duration than LAIF, so in a rising interest rate market, CAMP’s returns will be higher than LAIF’s returns. However, when interest rates decrease, then LAIF and CAMP typically have lower returns than Bank of New York.
Each year, the City analyzes the amount of funds needed in the short-term to cover operating costs and projected capital costs. The remaining funds are invested in investments that provide the best chance of earning the highest return, based on actual market conditions. Below is a summary of the transactions that have occurred during fiscal year 2023-2024:
No transfers were made to Bank of New York at this time due to the high yields in the short term markets.
In March 2024, $15,000,000 was reinvested in a CAMP TERM investment with a set rate of return of 5.12%
In June 2024, $12,000,000 was reinvested in a CAMP TERM investment with a set rate of return of 5.26%.
Below is a table showing the investments listed above and the interest that was earned, although may not be realized, in this quarter:
Investment Balance at 6/30/2024
Interest earned this
quarter
Estimated annual rate
of return
LAIF $382,502 $4,316 4.51%
CAMP Liquid
Funds $7,909,221 $107,368 5.43%
CAMP Term Funds
Matures 3/2025 $15,000,000 $192,000 5.12%
CAMP Term Funds
Matures 6/2025 $12,000,000 $157,800 5.26%
Bank of New York
(FMV) $32,050,752 $176,041 2.20%
TOTAL $67,342,475 $637,525 * 3.79%
*Interest earned this quarter does not match interest received because some investments are CAMP Term Funds and interest is not received until maturity.
Interest generated from the various investments is allocated quarterly as revenue to the various City funds, based on each funds’ balance at that time.
Section 115 Trust
In October 2022, $1,135,396.65 was initially deposited into the City’s Section 115 Trust with PARS. In addition, the annual savings from the refinancing of the 2020 Redevelopment bond has been directed by the City Council to be deposited into the Section 115 Trust, as described below:
FY 21/22 Refinancing Savings: $157,569
FY 22/23 Refinancing Savings: $161,681
FY 23/24 Refinancing Savings: $161,805
FY 24/25 Refinancing Savings: $162,117
FY 25/26 Refinancing Savings: $136,064
Below is a table showing the return on investment of these funds:
Investment Balance at
6/30/2024
Interest earned this
quarter
Estimated annual rate
of return
Section 115 Trust $1,520,041.20 $16,441.43 11.83%
The fund balance of the 115 Trust can be used to pay CalPERS normal cost and/or pay down the unfunded liability, which was $6,549,253 as of the June 30, 2022 CalPERS Valuation Report.
On September 13, 2022, the City Council approved Resolution 22-39 adopting investment guidelines for this 115 Trust. In addition to the investment guidelines, this resolution states that these funds can be used to pay CalPERS expenses when there is a deficit in the City’s General Fund with City Council concurrence, or as directed by the City Council.
Attachments:
1. Investment report for Council 06.2024