FIRST QUARTER FINANCIAL REPORT
FOR FISCALYEAR 2022-2023
Public Safety, Finance and
Strategic Support Committee
Prepared by the Finance Department
November 17, 2022
COMMITTEE AGENDA: 11/17/2022
ITEM: (C) 1
FILE: CC22-258
ATTACHMENTA
FIRST QUARTER
DEBT MANAGEMENT REPORT
FOR FISCALYEAR 2022-2023
2 3
OUTSTANDING DEBT ISSUED
(CITY AND ALL AGENCIES)
Outstanding Debt as of September 30, 2022: $4.83 Billion FY 2022-23 Y ear to Date Debt Issuance: $275 Million
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Annual Debt Issuance
($ million)
Outstanding Debt
($ million)
Quarter Ending September 30, 2022
City and Related Entity Debt Outstanding Conduit Debt Outstanding Annual Debt Issuance *YTD Debt Issuance
DIRECT OUTSTANDING DEBT
(CITY AND ALL AGENCIES)
4 Outstanding Debt as of September 30, 2022: $4.08 Billion (Excluding Multifamily Housing Revenue Bonds)
CSJ GO Bonds,
$548,595,000, 13.46%
TRAN, $275,000,000,
6.75%
CSJFA Bonds/ CP Notes,
$746,547,000, 18.31%
Airport Revenue Bonds/ CP,
$1,081,137,000, 26.52%
RWF Notes, $236,869,682,
5.81%
Successor Agency Tax
Allocation Bonds,
$1,188,750,000, 29.16%
DEBT ISSUANCE ACTIVITIES
DURING FIRST QUARTER (JULY – SEPTEMBER 2022)
• 2022 Tax and Revenue Anticipation Note (TRAN) –
$275 million
▪ Issued to facilitate the prefunding of Tier 1 retirement contributions and certain Other Post-Employment Benefits (OPEB) in FY 2022-2023
5 SELECTED DEBT MANAGEMENT ACTIVITIES
DURING FIRST QUARTER (JULY – SEPTEMBER 2022)
• Pre-issuance activities for CSJFA Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified)
▪ Underwriters selected:
➢ Wells Fargo as Senior Manager (book runner);
➢ Morgan Stanley as Co-Senior Manager;
➢ Academy Securities, Ramirez & Co. and Stifel Nicolaus & Co. as Co-Managers ▪ Kestrel Verifiers selected to provide Second Party Opinion (Green Bonds Designation) ▪ Wilmington Trust, N.A. selected as Trustee
• Redemption of Community Facilities Districts 6 and 10 Bonds ▪ Community Facilities District 6 (Great Oaks Route 85) Principal Redemption - $1.70 million ▪ Community Facilities District 10 (Hassler-Silver Creek) Principal Redemption - $1.83 million • Successor Agency Prior Period Adjustments Report for FY 2020-21 6 UPCOMING DEBT ISSUANCE AND MANAGEMENT
THROUGH DECEMBER 31, 2022
• Debt Issuance
▪ CSJFA Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified) is expected to close on December 15, 2022
• Debt Management
▪ Annual Mello-Roos and Marks-Roos Reporting in October 2022 ▪ 2022 Comprehensive Annual Debt Report
▪ Annual Continuing Disclosure/Compliance Reporting
7 BOND BUYER GO BONDYIELD INDEX
• 10-year history of higher-rated
(“AA+”) General Obligation
debt (20-year term) yield
averaged 3.04% and is currently
at 4.59% (as of 10/24/2022)
8 0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Interest Rate
Bond Buyer 11-Bond GO Index ('AA+' avg. rating)
Index Average 9/12 - 9/22 (3.04%)
VARIABLE INTEREST RATES
(TAXABLE)
• Taxable 3-Month LIBOR
interest rates paid by the City
averaged 3.06% in Q1. The
Taxable 3-Month LIBOR and
Daily SOFR interest rates are
currently 4.36% and 3.02%,
respectively (as of 10/24/2022)
9 0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Sep-21…
Nov-21…
Dec-21…
Feb-22…
Mar-22…
May-22…
Jul-22…
Aug-22…
Sep-22…
Interest Rate
3-Month LIBOR (Taxable)
Daily SOFR
GENERAL CREDIT RATINGS
CITY OF SAN JOSÉ
• The City of San José continues to maintain very high credit ratings:
T ype of Rating Moody’s S&P Fitch
Issuer Rating Aa1
(stable)
AA+
(stable)
AA+
(stable)
General Obligation Bonds Aa1
(stable)
AA+
(stable)
AAA
(stable)
Lease Revenue Bonds
(Essential Assets)
Aa2
(stable)
AA
(stable)
AA
(stable)
Lease Revenue Bonds
(Less Essential Assets)
Aa3
(stable)
AA
(stable)
AA-
(stable)
10 GENERAL OBLIGATION CREDIT RATINGS
• The City of San José’s GO Ratings are higher than the State of California’s ratings and analogous to Santa Clara County’s ratings, given the extent of the tax base and other credit fundamentals that the City and County share:
[1] Moody’s does not currently rate Santa Clara County’s General Obligation Bonds but maintains an Issuer rating of Aa1. 11 Entity Moody’s S&P Fitch
City of San José Aa1 AA+ AAA
State of California Aa2 AA- AA
Santa Clara County [1] AAA AA+
OTHER CITY CREDIT RATINGS
12 T ype of Rating Moody’s S&P Fitch
San José Airport Bonds A2
(stable)
A
(stable)
A
(stable)
SARA Senior Tax
Allocation Bonds Not Rated AA
(stable)
AA-
(stable)
FIRST QUARTER
INVESTMENT MANAGEMENT REPORT
FOR FISCALYEAR 2022-2023
13 INVESTMENT POLICY
(COUNCIL POLICY 1-12)
• Investments meet the requirements of the City’s Investment Policy and conform with California Government Code section 53601 • Authorized investments are only highly-rated fixed income securities • Investment Policy is reviewed annually and was last adopted by resolution of the City Council on March 15, 2022
• Investment Program is audited semi-annually for compliance purposes
14 INVESTMENT OBJECTIVES & REPORTING
• Manage investments to meet the City’s Investment Policy objectives:
▪ Safety
▪ Liquidity
▪ Yield
• Quarterly reports are available to the public
▪ Online
▪ In PSFSS Committee agenda packets
▪ In City Council agenda packets (for acceptance)
15 SOCIALLY RESPONSIBLE INVESTMENT GOALS
• Articulated in Section 22 of the Investment Policy:
▪ Support community well-being through:
➢ Safe and environmentally sound practices
➢ Fair labor practices
▪ Support equality of rights
▪ Serve all members of the local community
▪ Promote community economic development
16 PORTFOLIO PERFORMANCE SUMMARY
Size of T otal Portfolio $2,475,016,963
Earned Interest Yield 1.619%
Weighted Average Maturity 597 days
Fiscal Year-to-Date Net Income Recognized $10,280,845
Exceptions to the City Investment Policy this Quarter None 17 U.S. Treasury
$196,537,994
(7.9%)
U.S. Agency
$1,165,476,242
(47.1%)
Supranationals
$188,911,002
(7.6%)
Negotiable Certificate of Deposit (NCD)
$50,000,000
(2.0%)
Commercial Paper
$49,791,667
(2.0%)
Corporate Notes
$296,790,703
(12.0%)
Asset Backed Securities
$7,704,618
(0.3%)
Muni Bonds
$206,687,818
(8.4%)
Mortgage Backed Securities
$113,251,947
(4.6%)
JPAP
$175,610,073
(7.1%)Money Market Fund
$22,254,900
(0.9%)
LAIF
$2,000,000
(0.1%)
T otal Investment Portfolio: $2,475,016,963
PORTFOLIO INVESTMENTS
18 INVESTMENTS BY FUND
19 The $656.1 million in the
General Fund presented includes
$542.1 million of General Fund
monies, as well as $114.0 million
in other, separately tracked
general funds, such as:
• Emergency Reserve Fund
• Coronavirus Aid, Relief, and
Economic Security (CARES)
Act
• American Rescue Plan (ARP)
Act of 2021
• Other smaller funds and
reserves
Internal Services Fund
$10,705,969
Airport
$242,255,593
Capital Projects
$91,728,083
Debt Service
$60,048,769
Development Fees
$46,015,752
General Fund1
$656,054,440
Muni Water
$31,538,963
Parking
$44,188,068
Housing
$320,849,104
Special Revenue Funds
$434,828,374
Wastewater
$411,950,834
Trust & Agency
$12,438,827
SJ Clean Energy
$100,271,197
GENERAL FUND BALANCE
• General Fund* balance decreased by $287.3 million during the quarter and ended at $656.1 million as of September 30, 2022
▪ This decrease is attributed to prefunding of employer retirement contributions in July 2022, and debt service payments in August 2022
▪ General Fund balance usually (i) peaks during the months of January and June, when the bulk of property taxes are received; (ii) declines in the summer due to retirement prefunding; and (iii) declines throughout the rest of the year due to debt service payments and operational expenditures
• Projected investment maturities, cash, and revenues are sufficient to cover anticipated expenditures for the next six months
20 *The General Fund balance includes COVID-19 related monies, such as American Rescue Plan Act (ARPA) dollars. $0
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$700
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$900
$1000
Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dollars in millions
General Fund Wastewater Airport Housing Special Revenue Fund • The following graph
compares monthly balances
of the five largest City funds
as reported by FMS
COMPARISON OF CASH BALANCES
(BY SELECT FUNDS)
21 • “City” refers to City's Fund 3
Portfolio, and the yield data are
month-end weighted average
yields
• “LAIF” refers to the State of CA
Local Agency Investment Fund
and yield data are average
monthly effective yields
• “BAML” refers to Bank of
America Merrill Lynch 1-3 Y ear
AAA-A US Corporate &
Government Index and yield data
are rolling 2-year effective yield
BENCHMARK COMPARISONS
22 0.00
0.50 1.00
1.50 2.00
2.50 3.00
Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Yield (%)
City LAIF BAML
Yield WAM
City: 1.967% 602
LAIF: 1.513% 304
BAML: 1.155% 679
FY 2022-23 INTEREST RATE COMPARISONS
2FQ22
12/31/2021
3FQ22
3/31/2022
4FQ22
6/30/2022
1FQ23
9/30/2022
Current
10/25/2022
Portfolio (Fund 3) 0.86% 0.92% 1.30% 1.88% 2.15%
Fed Funds Rate 0.08% 0.33% 1.58% 3.08% 3.08%
Money Market 0.03% 0.14% 1.36% 2.81% 2.88%
LAIF 0.22% 0.40% 0.92% 1.60% 1.80%
Treasury Notes/Bills
90 Day 0.04% 0.50% 1.67% 3.27% 4.03%
1 Year 0.38% 1.61% 2.78% 3.99% 4.58%
3 Year 0.96% 2.51% 3.01% 4.29% 4.46%
5 Year 1.26% 2.46% 3.04% 4.09% 4.26%
23 INVESTMENT STRATEGY
• Continue matching known expenditures with suitable investments within the 24-month horizon
• Extend a portion of the portfolio beyond a two-year term, when appropriate, to provide income and structure to the portfolio • Maintain the diversification of the portfolio
• Focus on core objectives of safety, liquidity, and yield 24 FIRST QUARTER
REVENUE MANAGEMENT REPORT
FOR FISCALYEAR 2022-2023
25 REVENUE MANAGEMENT PROGRAMS
• Finance Department Revenue Management focuses on collecting all outstanding receivables, with an emphasis on reducing delinquent accounts and enhancing revenue compliance, through four primary collection programs:
▪ Accounts Receivable
▪ Business Tax
▪ Compliance and Monitoring
▪ Utility Billing
• Efforts may span several reporting periods, and actual collections are reported as funds are received by the City
26 T otal Revenue: $4.624 billion
Source: 2021-22 City Manager’s
Budget Office Annual Report
(Graph is updated annually)
REVENUE MANAGEMENT PORTFOLIO
FY 2021-22 REVENUE ($ IN MILLIONS)
27 Lodging T axes
and Fees
$37.6M
2.7%
Franchise Fees
$49.9M
3.6%
Utility Users T ax
$103.6M
7.6%
T elephone Line T ax
$21.3M
1.6%
Real Property
Transfer T ax
$110.0M
8.0%
Utility Billing
$429.5M
31.3%
Sales T ax
$323.1M
23.6%
Misc. Billing
$223.8M
13.3%
Business T axes
$72.6M
5.3%
Revenue
Management
$1.372B
City-wide Revenue
(excluding Revenue
Management)
$3.252B
Includes invoices billed through the
Business Tax System, the centralized
Accounts Receivable system (RevQ),
and the Utility Billing System
(Graph is updated annually)
INVOICING AND PAYMENTS
FIVE-YEAR HISTORY (FY 2017-18 TO FY 2021-22)
28 99.6% 99.5% 99.6% 98.9% 96.2%
0%
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70%
80%
90%
100%
$-
$100
$200
$300
$400
$500
$600
$700
$800
FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22
In Millions
Payments Outstanding Percentage Collected
OUTSTANDING RECEIVABLES
THREE-YEAR HISTORY (Q2 FY 2019-20 TO Q1 FY 2022-23)
29 -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
19-20
Q2
19-20
Q3
19-20
Q4
20-21
Q1
20-21
Q2
20-21
Q3
20-21
Q4
21-22
Q1
21-22
Q2
21-22
Q3
21-22
Q4
22-23
Q1
Quarter to Quarter % Change
Millions
Revenue Management Aging
Total Receivables Delinquent (91+ days) Delinquency Percentage Change Write-Off Pending
$3.1M
1,469 Invoices
Liens
$0.8M
305 Invoices
Restitution, Payment Plan
$1.1M
290 Invoices
Legal, Bankruptcy
$3.3M
675 Invoices
Collection Agency
$19.0M
27,222 Invoices
Active
$33.1M
30,568 Invoices
T otal
Current
$18.5M
T otal Delinquent
$54.9M
30 FY 2022-23 Q1 DELINQUENT RECEIVABLES
COLLECTION STATUSSUMMARY ($ IN MILLIONS)
(Rounded)
As of September 30, 2022
Target ROI: 5.0
31 COLLECTIONS & RETURN ON INVESTMENT
REVENUE MANAGEMENT COLLECTIONS (Q2 FY 2019-20 TO Q1 FY 2022-23)
7.7 12.3
5.7 11.2 10.6 10.8
5.8 5.6
0.00 5.00
10.00 15.00
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
20-21 Q2 20-21 Q3 20-21 Q4 21-22 Q1 21-22 Q2 21-22 Q3 21-22 Q4 22-23 Q1 Return on Investment (ROI)
Millions
Business Tax Accounts Receivable Actual ROI
FIRST QUARTER
PURCHASING AND
RISK MANAGEMENT REPORT
FOR FISCALYEAR 2022-2023
32 PURCHASING PROGRAM
The Purchasing Division of the Finance Department is responsible for the centralized procurement of equipment, supplies, materials, Information T echnology (IT), and non-consulting services, pursuant to the City of San José Municipal Code Title 4, Chapter 4.12. 33 PURCHASINGTRANSACTIONS COMPLETED
FY2022-23, FIRST QUARTER
34 Procurement T ype Transactions
Request for Quotes Awarded 12
Request for Bids Awarded 8
Request for Information Completed 3
Request for Proposals Completed 1
Purchase Orders and Purchase Order Adjustments Issued 781 New Agreements Negotiated and Executed 6
Amendments, Change Orders, Service Orders, Options Executed 29 Council Memoranda Issued 12
Purchase Order Dollars Procured $97,047,249
Contract Dollars Procured $34,867,125
PROCUREMENT IMPROVEMENT UPDATE
• Procurement Improvement is a Strategic Support initiative under the City Roadmap
▪ Finance is working with Guidehouse on implementing incremental updates to the Purchasing website
• Staff evaluating and prioritizing the implementation of key recommendations ▪ The Deputy Director of Purchasing & Risk Management left City employment as of September 30
▪ Staff currently is targeting the February 2023 PSFSS Committee to present proposed Municipal Code changes
35 DISPARITY STUDY UPDATE
• A Citywide Disparity Study is underway to evaluate any need for new procurement policies to facilitate participation of Minority-, Women-, and Other-Owned Business Enterprises (MWOBE) in City contracting.
• Finance-Purchasing, in collaboration with the City Manager's Office of Communications and Racial Equity, and theEconomic Development Department, is working with MGT of America Consulting, LLC to carry out this scope of work.
• Completed Activities this Quarter
▪ City contractor and, where available, subcontractor data collection for contracts from FY2017-18 to FY2021-22 complete, and data analysis has begun • Upcoming Activities for Next Quarter
▪ City Disparity Study multi-lingual website went live on October 25, 2022 https://www.sanjoseca.gov/your-government/departments-offices/finance/disparity-study ▪ First Business Engagement Meeting scheduled for November 14, 2022 36 RISK MANAGEMENT PROGRAM
The Division is responsible for the procurement and oversight of the City’s property and casualty insurance programs and providing contractual risk management services, property subrogation claims reporting and other key services to City Departments
37 38
RISK MANAGEMENTTRANSACTIONS COMPLETED
FY2022-23, FIRST QUARTER
T ype Transactions
Request for Contract Insurance Specifications 259
Request for Insurance Compliance Review 132
Request for Letters of Self-Insurance 26
Subrogation Dollars Billed to Responsible Third Parties $289,285 Council and Committee Memorandums Issued 3
RISK MANAGEMENT COMPLETED THE
CITYWIDE INSURANCE RENEWALS
• Other highlights include:
▪ Completed the Citywide Insurance Renewals
▪ Resolved two property losses totaling ~$1.2 million in recoveries for City Departments
➢Recovered $447K from property damage claim arising from broken sprinkler main at SAP Center that occurred in October 2021
➢Recovered $752K from property damage claim arising from damage to a forced main pipe during construction of at the Regional Wastewater Facility in January 2022 ▪ Facilitated eight (8) loss prevention engineering visits by the City’s property insurer (SAP Center, Ice Centre, T ech Museum, and five Community Centers) 39