SECOND QUARTER FINANCIAL REPORT
FISCALYEAR 2022-2023
Public Safety, Finance and
Strategic Support Committee
Prepared by the Finance Department
February 1, 2023
COMMITTEE AGENDA: FEBRUARY 16, 2023
ITEM: (d) 1
FILE: CC-23-019
ATTACHMENTA
SECOND QUARTER
DEBT MANAGEMENT REPORT
FISCAL YEAR 2022-2023
2 Outstanding Debt as of December 31, 2022: $5.22 Billion FY 2022-23 Year to Date Debt Issuance: $606.5 Million
3 OUTSTANDING DEBT ISSUED
(CITY AND ALL AGENCIES)
*YTD Debt Issuance
$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 December 31, 2022
City and Related Entity Debt Outstanding Conduit Debt Outstanding Annual Debt Issuance Outstanding Debt as of December 31, 2022: $4.40 Billion (Excluding Multifamily Housing Revenue Bonds)
4 DIRECT OUTSTANDING DEBT
(CITY AND ALL AGENCIES)
CSJ GO Bonds,
$548,595,000
12.46%
TRAN, $275,000,000
6.25%
CSJFA Bonds/ CP
Notes, $745,132,000
16.93%
Airport Revenue Bonds/ CP,
$1,076,317,000
24.45%
Wastewater Revenue
Bonds, $268,355,000
6.10%
RWF Notes,
$299,999,994
6.81%
Successor Agency
Tax Allocation Bonds,
$1,188,750,000
27.00%
DEBT ISSUANCE ACTIVITIES
DURING SECOND QUARTER (OCTOBER – DECEMBER 2022)
5 • Debt Issuance
▪ CSJFA Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified) – $268.36 million, December 2022
▪ Regional Wastewater Facility Revenue Tax-Exempt Notes – o Issued $63.1 million in October 2022
o Reached maximum capacity of $300 million Revolving Line of Credit o Notes will be refunded in full with 2022B bond proceeds in March 2023
SELECTED DEBT MANAGEMENT ACTIVITIES
DURING SECOND QUARTER (OCTOBER – DECEMBER 2022)
6 • Request for Proposal
▪ SJCE Revolving Credit Facility ($250 million)
• Reporting
▪ Annual Continuing Disclosure and Compliance Reporting ▪ 2022 Comprehensive Annual Debt Report (CADR)
UPCOMING DEBT ISSUANCE AND MANAGEMENT
THROUGH MARCH 31, 2023
7 • Debt Management
▪ Repayment of $300 million of Subordinate Wastewater Revenue Notes, Series A with proceeds of CSJFA Wastewater Revenue Bonds, Series 2022B ▪ Redemption of $137.5 million of Tax Revenue Anticipation Notes • Reporting
▪ CDIAC - Annual Debt Transparency Reporting (ADTR)
• 10-year history of higher rated
(“AA+”) General Obligation
debt (20-year term) yield
averaged 3.04% and is currently
at 3.35% (as of 1/12/23).
8 BOND BUYER GO BONDYIELD INDEX
3.04%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Interest Rate
Bond Buyer 11-Bond GO Index ('AA+' avg. rating)
Index Average 12/12 - 12/22 (3.04%)
• Taxable 3-Month LIBOR
interest rates paid by the City
averaged 4.51% in Q2. The
Taxable 3-Month LIBOR and
Daily SOFR interest rates are
currently 4.81% and 4.31%
respectively (as of 1/10/23).
9 VARIABLE INTEREST RATES
(TAXABLE)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Dec-21…
Feb-22…
Mar-22…
May-22…
Jul-22…
Aug-22…
Sep-22…
Nov-22…
Dec-22…
Interest Rate
3-Month LIBOR (Taxable)
Daily SOFR
GENERAL OBLIGATION CREDIT RATINGS
• The City’s GO Ratings are higher than the State of California’s ratings and analogous to Santa Clara County’s ratings, which is to be expected given the extent of the tax base and other credit fundamentals that the City and the County share:
10 Entity Moody’s S&P Fitch
CITY OF SAN JOSÉ Aa1 AA+ AAA
STATE OF CALIFORNIA Aa2 AA- AA
SANTA CLARA COUNTY N/A AAA AA+
[1] Moody’s does not currently rate Santa Clara County’s General Obligation Bonds but maintains an Issuer rating of Aa1.
GENERAL CREDIT RATINGS
CITY OF SAN JOSÉ
• The City of San José continues to maintain very high credit ratings. 11 T ype of Rating Moody’s S&P Fitch
KBRA
(Kroll)
ISSUER RATING Aa1
(stable)
AA+
(stable)
AA+
(stable) N/A
GENERAL OBLIGATION BONDS Aa1
(stable)
AA+
(stable)
AAA
(stable) N/A
LEASE REVENUE BONDS
(ESSENTIAL ASSETS)
Aa2
(stable)
AA
(stable)
AA
(stable) N/A
LEASE REVENUE BONDS
(LESS ESSENTIAL ASSETS)
Aa3[1]
(stable)
AA
(stable)
AA-
(stable) N/A
[1] Moody’s assigns a rating of Aa3 to CSJFA 2020B and 2022A bonds which the rating agency considers less essential assets.
OTHER CITY CREDIT RATINGS
12 TYPE OF RATING MOODY’S S&P FITCH KBRA (KROLL)
SAN JOSÉ AIRPORT
BONDS
A2
(stable)
A
(stable)
A
(stable) N/A
SARA SENIOR TAX
ALLOCATION BONDS N/A AA
(stable)
AA
(stable) N/A
SARA SUBORDINATE
TAX ALLOCATION
BONDS
N/A AA-
(stable)
AA-
(stable) N/A
WASTEWATER
REVENUE BONDS N/A[1] AAA
(stable)
AAA[2]
(stable)
AAA
(stable)
[1] Moody’s does not rate CSJFA Wastewater Revenue Bonds. [2] KBRA (Kroll) has assigned a rating to the CSJFA Wastewater Revenue Bonds exclusively..
SECOND QUARTER
INVESTMENT MANAGEMENT REPORT
FOR FISCAL YEAR 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
▪ Proposed policy changes included on February 16, 2023 PSFSS Committee Agenda ▪ City Council approval anticipated on March 21, 2023
• 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
▪ On-line
▪ 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 Total Portfolio $2,538,705,032
Earned Interest Yield 2.233%
Weighted Average Maturity 606 days
Fiscal Year-to-Date Net Income Recognized $24,529,648
Exceptions to the City Investment Policy this Quarter None 17 T otal Investment Portfolio:
$2,538,705,032
18 PORTFOLIO INVESTMENTS
U.S. Treasury
$181,624,817 7.2%
U.S. Agency
$1,160,280,885 45.7%
Supranationals
$190,688,163 7.5%
Negotiable
Certificate of
Deposit (NCD)
$115,614,720 4.6%
Commercial Paper
$48,333,806 1.9%
Corporate Notes
$381,093,633 15.0%
Asset Backed
Securities
$4,660,755 0.2%
Muni Bonds
$233,466,902
9.2%
Mortgage Backed
Securities
$149,749,652 5.9%
JPAP
$50,216,989
2.0%
Money Market Fund
$20,722,200 0.8%LAIF $2,252,511
0.1%
The $708.9 million in the General
Fund presented includes
$613,707,115 of General Fund
monies, as well as $95,181,842 in
other, separately tracked general
funds, such as the Emergency Reserve
Fund, the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, the
American Rescue Plan Act (ARPA) of
2021 and other smaller funds and
reserves.
19 INVESTMENTS BY FUND
Internal Services
Fund $29,214,546
Airport
$250,393,845
Capital Projects
$60,705,353
Debt Service
$60,230,002
Development Fees
$49,741,075
General Fund
$708,888,957
Muni Water
$35,460,968
Parking
$40,972,080
Housing
$313,845,023
Special Revenue
Funds $389,511,320
Wastewater
$434,671,267
Trust & Agency
$12,553,861
SJ Clean Energy
$148,319,854
GENERAL FUND BALANCE
• General Fund balance increased by $52.8 million during the quarter, with the receipt of property tax advances, and ended with a balance of $708.9 million as of December 31, 2022
▪ General Fund balance usually peaks during the months of January and June, when the bulk of property taxes are received, declines in the summer when the City implements retirement prefunding, and 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 21
COMPARISON OF CASH BALANCES
(BY SELECT FUNDS)
The following graph compares
monthly balances of the five largest
City funds as reported by FMS.
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1000
Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Dollars in millions
General Fund Wastewater Airport Housing Special Revenue Fund • 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 Year AAA-A US
Corporate & Government Index
and yield data are rolling 2-year
effective yield.
22 BENCHMARK COMPARISONS
0.00 0.50
1.00 1.50
2.00 2.50
3.00 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Yield (%)
City LAIF BAML
Yield WAM
CITY: 2.323% 611
LAIF: 2.173% 287
BAML 1.700% 675
INVESTMENT STRATEGY
• Continue matching known expenditures with suitable investments within the 24-month horizon
• Extend a portion of the portfolio beyond 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 23 SECOND QUARTER
REVENUE MANAGEMENT REPORT
FOR FISCAL YEAR 2022-2023
24 REVENUE MANAGEMENT PROGRAMS
• The Revenue Management Program 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
• Revenue Management also is implementing an Accounts Receivable Amnesty Program to encourage eligible debtors to pay their principal balances • Efforts may span several reporting periods, and actual collections are reported as funds received by the City.
25 T otal Revenue: $4.624B
Source: 2021-22 City Manager’s
Budget Office Annual Report
(Graph is updated annually)
26 REVENUE MANAGEMENT PORTFOLIO
FY 2021-22 REVENUE ($ IN MILLIONS)
Lodging Taxes
and Fees
$37.6M
2.7%
Franchise Fees
$49.9M
3.6%
Utility Users Tax
$103.6M
7.6%Telephone Line Tax
$21.3M
1.6%Real Property
Transfer Tax
$110.0M
8.0%
Utility Billing
$429.5M
31.3%
Sales Tax
$323.1M
23.6%
Misc. Billing
$223.8M
16.3%
Business Taxes
$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)
27 INVOICING AND PAYMENTS
FIVE-YEAR HISTORY (FY 2017-18 TO FY 2021-22)
99.6% 99.5% 99.6% 98.9% 96.2%
0%
10%
20%
30%
40%
50%
60%
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
28 OUTSTANDING RECEIVABLES
THREE-YEAR HISTORY (Q3 FY 2019-20 TO Q2 FY 2022-23)
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
19-20
Q3
19-20
Q4
20-21
Q1
20-21
Q2
20-21
Q3
20-21
Q4
21-22
Q1
21-22
Q2
21-22
Q3
21-22
Q4
22-23
Q1
22-23
Q2
Quarter to Quarter % Change
Millions
Revenue Mangement Aging
Total Receivables Delinquent (91+ days) Delinquency Percentage Change 29 FY 2022-23 Q2 DELINQUENT RECEIVABLES
COLLECTION STATUSSUMMARY ($ IN MILLIONS)
*Rounded
As of December 31, 2022
Write-Off Pending (A/R only)
$3.1M
1,713 Invoices
Liens
$0.8M
306 Invoices
Restitution, Payment
Plan
$1.0M
280 Invoices
Legal, Bankruptcy
$3.3M
691 Invoices
Collection Agency
$20.5M
27,507 Invoices
Active
$29.6M
31,442 Invoices
Total Current
$36.3M
Total Delinquent
$58.2M
Revenue Management
COLLECTIONS & RETURN ON INVESTMENT
REVENUE MANAGEMENT COLLECTIONS
(Q3 FY 2020-21 TO Q2 FY 2022-23)
30 Target ROI: 5.0
12.3 5.7
11.2 10.6 10.8
5.8 5.6
5.3 0.00
5.00 10.00
15.00 $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
20-21 Q3 20-21 Q4 21-22 Q1 21-22 Q2 21-22 Q3 21-22 Q4 22-23 Q1 22-23 Q2 Return on Investment (ROI)
Millions
Business Tax Accounts Receivable Actual ROI
COLLECTION AND WRITE-OFF PROCESS
• Delinquency Notifications Sent to Debtor
▪ 30 Day Notice, 60 Day Notice, Final Notice
• Collection Agency Referral Analysis
▪ Cost-benefit analysis of staff time vs. receivable amount ▪ City’s ability to collect through alternative means
▪ Type of service billed or receivable amount
• Analysis for Write-Off
▪ Collection efforts exhausted
▪ Debtor has no assets, filed bankruptcy, expiration of statute, deceased, incarcerated, or “skipped”
31 ACCOUNTS RECEIVABLE INVOICING & PAYMENTS
FIVE-YEAR HISTORY (FY 2017-18 TO FY 2021-22)
32 $-
$50
$100
$150
$200
$250
$300
FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22
Payments Outstanding
OUTSTANDING RECEIVABLES
ACCOUNTS RECEIVABLE
THREE-YEAR HISTORY (Q3 FY 2019-20 TO Q2 FY 2022-23)
33 -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$-
$10
$20
$30
$40
$50
$60
$70
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
22-23
Q2
Quarter to Quarter % Change
Millions
Current Receivables Delinquent (91+ days) Delinquency Percentage Change
SECOND QUARTER
PURCHASING AND
RISK MANAGEMENT REPORT
FOR FISCALYEAR 2022-2023
34 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. 35 PURCHASINGTRANSACTIONS COMPLETED
SECOND QUARTER FY2022-23
PROCUREMENTTYPE
SECOND QUARTER
TRANSACTIONS
FISCALYEAR TO
DATE
Request for Quotes Awarded 13 25
Request for Bids Awarded 13 21
Request for Information Completed 1 4
Request for Proposals Completed 0 1
Purchase Orders and Purchase Order Adjustments Issued 405 1,186 New Agreements Negotiated and Executed 3 9
Amendments, Change Orders, Service Orders, Options Executed 34 63 Council Memoranda Issued 12 24
Purchase Order & Contract Dollars Procured $61,077,861 $244,388,798 36 PROCUREMENT IMPROVEMENT UPDATE
• Procurement Improvement is a Strategic Support initiative under the City Roadmap
• Staff presenting status report, proposed Municipal Code changes today ▪ Item (d) 4 CC 23-022, Amendments to Title 4 of the Municipal Code Related to Procurement of Goods and Services Status Report
• Staff continues review and consideration of other recommendations from Procurement Improvement Study
37 DISPARITY STUDY UPDATE
• A Citywide Disparity Study is underway to evaluate any need for new procurement policies to facilitate participation of diverse business enterprises in City contracting.
• Finance-Purchasing, in collaboration with the City Manager's Office of Communications, Racial Equity and Economic Development & Cultural Affairs, is working with MGT of America Consulting, LLC to deliver this scope of work. • Completed Activities this 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 held November 14, 2022 • Upcoming Activities for Next Quarter
38 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
39 40
RISK MANAGEMENTTRANSACTIONS COMPLETED
SECOND QUARTER FY2022-23
TRANSACTIONTYPE
SECOND QUARTER
TRANSACTIONS
FISCALYEAR TO
DATE
Request for Contract Insurance Specifications 245 504
Request for Insurance Compliance Review 124 256
Request for Letters of Self-Insurance 14 40
Subrogation Dollars Billed to Responsible Third Parties $249,761 $539,046 Council and Committee Memorandums Issued 0 3