City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: JUNE 14, 2022 FROM: FINANCE DEPARTMENT WARDS: ALL
SUBJECT: FISCAL YEAR 2021/22 THIRD QUARTER CASH, INVESTMENTS, AND DEBT REPORT ISSUE:
That the City Council receive and provide input on the attached Fiscal Year 2021/22 Third Quarter Cash, Investments, and Debt Report.
RECOMMENDATIONS:
That the City Council receive and provide input on the attached Fiscal Year 2021/22 Third Quarter Cash, Investments, and Debt Report.
BACKGROUND:
On March 15, 2022, the City Council received and provided input on the Fiscal Year 2021/22 Second Quarter Cash, Investments, and Debt report.
DISCUSSION:
It is staff’s intention to provide the Cash, Investments, and Debt Quarterly report at the same City Council meeting as the Quarterly Financial Report for the General Fund and other City funds in order to provide a comprehensive review of all City Finance activities, and to obtain City Council input related to those activities.
QUARTERLY CASH AND INVESTMENT REPORT
Sound investment practices are an essential component of the City’s strong fiscal management. The Finance Department is responsible for managing the City’s investment portfolio, focusing first on the safety of investments and then on liquidity and an appropriate rate of return. The investment results and portfolio composition are summarized and reported to the City Council each quarter. As of March 31, 2022, the City’s pooled investment portfolio’s market value was $894 million. The market value of investments held for the Section 115 Pension Trust Fund, fiscal agents (bond proceeds and reserve funds primarily), and other miscellaneous cash amounts to an additional $145 million. The weighted average yield of the pooled investment portfolio is 0.80% as of March 31, 2022.
The authority to manage the City’s investment program is provided by the California Government Code Sections 53600-53610 which allows the City Council to delegate to the Treasurer/CFO, for a one-year period, the authority to invest or to reinvest all funds of the City. In accordance with the City Charter and under authority granted by the City Council, the Chief Financial Officer is designated the responsibilities of the Treasurer and is responsible for investing the unexpended cash in the City Treasury consistent with the City’s adopted investment policy.
The Cash and Investment Report, including a listing of cash balances by fund, is included in Attachment 1. These cash balances reflect each fund’s share of the City’s pooled investment portfolio. Also shown are interfund loan receivables, which are treated as available cash due to the Chief Financial Officer/Treasurer’s authorization to move loan receivables to other funds as needed.
All listed funds have a positive cash balance except for the following funds as of March 31, 2022:
Civic Entertainment – Convention Center, Visitors Bureau, Sports Commission ($1,821,071) has a negative cash balance due to the loss of revenues from the COVID-19 impact. This account is being monitored and will return to positive by fiscal year-end.
Civic Entertainment – Cheech Marin Center ($2,631,105) has a negative cash balance due to a pending submittal of a grant reimbursement to offset expenses and negative cash.
Home Investment Partnership Program ($1,665,276), Housing Opportunities for Persons with AIDS ($1,893,303), NPDES Storm Drains ($108,330), Special Districts ($60,695), Transportation Uniform Mitigation Fees ($1,892,613), and Successor Agency ($950,265) have negative cash balances due to the timing of expenditures; however, the negative balances are fully offset by receivables.
Special Deposits ($4,837,867) has a negative cash balance from decreases in market value of investments primarily due to increased interest rates and related drop in market prices. The adjustments to market value throughout the year are booked to the Special Deposits fund; however, at year-end this adjustment will be proportionately booked through all related funds and the Special Deposits fund will return to positive by fiscal year-end.
Debt Service Fund – General ($12,853,951) which is fully offset by outstanding cash transfers from all funds related to their share of the Pension Obligation Bond (POBs) payments made by the Debt Service Fund ($28 million) and other debt service payments.
QUARTERLY DEBT REPORT
The Finance Department is responsible for managing the City’s debt portfolio, which includes issuing new debt and monitoring opportunities to refinance existing debt. The Quarterly Debt Report (Attachment 2) summarizes the composition of the City’s debt portfolio, details the revenue sources utilized to pay the debt service associated with each outstanding debt, and provides detailed information regarding the total principal and interest payments made in the third quarter of Fiscal Year 2022 by debt classification and fund.
Debt Summary Analysis
The City’s outstanding principal varies quarterly as a result of debt service payments, bond calls, new debt issuances, and refunding and defeasance activity. At the end of the third quarter, the City’s outstanding principal balance decreased by $6,737,111 from the end of the second quarter of fiscal year 2022. This principal decrease is due to debt service principal payments on 2008A Certificates of Participation (Renaissance), Capital Lease payments, and the Convention Center Expansion Loan.
The chart below depicts the composition of the City’s debt portfolio at the end of the third quarter. The Enterprise funds are responsible for most of the City’s debt and are primarily for capital project financing offset by the revenues generated by the newly financed facilities. The General Fund and Measure Z have the next largest percentage of debt, providing financing for projects and equipment related to public safety, downtown revitalization, and public facility and infrastructure improvements. Payment of debt service for the City’s Pension Obligation Bonds is allocated among many of the funds, distributing debt service in alignment with departmental staffing costs.
For purposes of this report, the Sewer, Water, Electric, Refuse, Special Transit, Civic Entertainment, Convention Center, and Parking funds are consolidated under the classification of Enterprise Funds. Measure Z and the General Fund are grouped together. Measure A and the City’s Parks Special Capital fund are classified under Capital Projects Funds. While the Assessment Districts, Galleria Agreement, and Community Facilities Districts are part of the City debt portfolio, they aren’t classified as City obligations. They are offset by individual Improvement Districts which are separate legal entities from the City, formed to issue debt and levy assessments or special tax to finance improvements related to development in those districts.
The following bar chart provides the City’s debt service obligations using the same classification methodology, depicting the aggregate principal and interest payments on all City debt instruments by fund. As illustrated below, the City has a stable debt service curve that results in steadily diminishing annual debt service payments and that minimizes any upward spikes in payments that could negatively impact the City’s ability to pay debt service.
Debt Related Activities in Third Quarter
Finance staff regularly monitor the market to identify opportunities to maximize debt service savings through refunding and to issue debt when rates are most advantageous. Within the third quarter, Debt Division staff prepared and filed Annual Continuing Disclosure reports for all City publicly issued bonds. The City began the process of preparing the Annual Engineer’s reports for the Street Light Assessment District and Riverwalk and Sycamore Canyon Landscape Maintenance Districts.
Other debt related activities conducted within the third quarter includes:
Analysis, preparation, and posting of the SB1029 CDIAC Annual Debt Transparency Report Renewal of Electric and Water Revolving Fund Loan
Began process for annual Lighting Maintenance District and Street Light Assessment District levy renewal Negotiation and Council approval of Riverside Unified School District CFD 39 Joint Community Facilities District Agreement AB1666 legislative requirements compliance
Conducted analysis and initial formation proceedings for new CFD 2021-3 (Bridle Ridge) Commenced analysis and disclosure for public issuance of new money bonds for CFD 2015-2 (Pomelo) STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 5 – High Performing Government and Goal 5.3 – Enhance communication and collaboration with community members, to improve transparency, build public trust, and encourage shared decision-making.
This item aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – The preparation and approval of the debt and investment quarterly report ensures transparency and demonstrates compliance with City Debt and Investment Policies.
Equity – The debt and investment portfolios detailed in this report are used to share and offset the long-term cost of growth, development, and expansion among Riverside businesses and residents.
Fiscal Responsibility – The Quarterly Report demonstrates fiscal responsibility and accountability to show the current financial situation of the City and closely related agencies.
Innovation – Innovative stewardship of investments and municipal debt is an effective way to track, fund, and finance, repair and improvements while ensuring sufficient cash to meet obligations.
Sustainability & Resiliency – Quarterly accounting and reporting helps to ensure City funds are used in a sustainable way without compromising future needs.
FISCAL IMPACT:
There is no fiscal impact associated with this report.
Prepared by: Heidi Schrader, Debt and Treasury Manager
Certified as to
availability of funds: Edward Enriquez, Chief Financial Officer/City Treasurer Approved by: Edward Enriquez, Interim Assistant City Manager Approved as to form: Phaedra A. Norton, City Attorney
Attachments:
Cash and Investment Report
Quarterly Debt Report
FY 2021/22 3rd Quarter Investments and Debt Report ● Page 5