CC 01-17-2024 Item No. 17 Receive the monthly Treasurer's Investment Report for December 2023 CC 1-17-2024
Item No. 17
Receive the monthly
Treasurer's
Investment Report
for December 2023
Written Communications
From:Kitty Moore
To:City Clerk; Pamela Wu; Kirsten Squarcia
Cc:Christopher Jensen
Subject:Written Communications and Questions for Council 1/17 meeting Items 15 and 17
Date:Monday, January 15, 2024 9:26:39 AM
Attachments:image001.png
image002.png
Investment Report June 2022 Staff Report.pdf
Dear City Manager and City Clerk,
Please include the following request for information for written communications and Staff questions for agenda
items 15 and 17, Monthly Treasurer’s Investment Reports:
Council had been receiving what had been a complete list of investments as you can see from the June 27, 2022
Audit Committee report, however at the start of 2023 Council removed the Audit Committee’s authority to review
the Monthly Investment reports and instead they go directly to Council and are put under Informational Items, and
what has been provided was abbreviated and no longer following the requirments.
To make prudent financial decisions, the Council needs to be informed of our financial condition, please provide
the fund balances and transactions for all of the accounts per Ca Gov Code 53607 and CMC 2.24.050.
See the change below:
2022 provided documents included balances for ALL accounts:
2022 provided documents to Council only include ONE account, see 15 and 17
below:
As stated above, in order to make prudent financial decisions, the Council needs to be informed of our financial
condition, please provide the fund balances and transactions for all of the accounts per Ca Gov Code 53607 and
CMC 2.24.050.
“On May 19, 2022, the City Council approved the City Investment Policy. Per the City's Investment Policy,
the Treasurer shall submit monthly transaction reports to the City Council within 30 days of the end of the
reporting period per California Government Code Section 53607. In addition to the monthly transaction
reports, quarterly investment reports are submitted to the City Council approximately 45 days following the
end of the quarter. The quarterly investment report offers a more extensive discussion of the City's
economy, cash flow, and investments. The City's Municipal Code Section 2.24.050 Investment Authority
states that the Treasurer shall make a monthly report of all investment transactions to the City Council.”
(see attached June 27, 2022 Staff Report).
Additionally, here is the Cupertino Municipal Code requirement for the monthly reports:
2.24.050 Investment Authority.
Pursuant to authority granted by state statutes, there is hereby delegated to the Treasurer
the authority to invest or to reinvest funds of the City, or to sell or exchange securities so
purchased, and who shall thereafter assume full responsibility for such transactions until
such time as the delegation of authority is revoked. The Treasurer shall make a monthly
report of all such transactions to the members of the City Council, the City Manager and
also make it available for review by such other persons who may so request.
Thank you,
Kitty Moore
Kitty Moore
Councilmember
City Council
KMoore@cupertino.gov
(408) 777-1389
AUDIT COMMITTEE STAFF REPORT
Meeting: June 27, 2022
Subject
Consider the Monthly Treasurer's Investment Report for May 2022
Recommended Action
Review the Monthly Treasurer's Investment Report for May 2022 and recommend filing
with City Council
Discussion
Background
On May 19, 2022, the City Council approved the City Investment Policy. Per the City's
Investment Policy, the Treasurer shall submit monthly transaction reports to the City
Council within 30 days of the end of the reporting period per California Government Code
Section 53607. In addition to the monthly transaction reports, quarterly investment reports
are submitted to the City Council approximately 45 days following the end of the quarter.
The quarterly investment report offers a more extensive discussion of the City's economy,
cash flow, and investments.
The City's Municipal Code Section 2.24.050 Investment Authority states that the Treasurer
shall make a monthly report of all investment transactions to the City Council. Lastly, the
City's Municipal Code Section 2.88.100 Duties-Powers-Responsibilities lists one of the
powers and functions of the Audit Committee is "to review the monthly Treasurer's
report."
Per the referenced code provisions, a Treasurer's Investment Report shall be submitted to
the Audit Committee and City Council every month.
Treasurer's Investment Report
The report provides an update on the City's investment portfolio for the month ending
May 31, 2022. The attached statements include balances and transactions of the City's
investments with the Local Agency Investment Fund (LAIF) and Chandler Asset
Management.
2
While not governed by the City's Investment Policy, statements for the City's Wells Fargo
cash accounts and Public Agency Retirement Services (PARS) Section 115 Trusts are also
attached per a request from the Treasurer's Report sub-committee.
As of May 31, 2022, the City's General Ledger cash and investments balance was $229.8
million, a $1.5 million increase from the prior month due to receipts of $8.5 million,
disbursements of ($7.5) million, and journal adjustments of $0.4 million.
Cash and Investments – General Ledger Balance
Fund Type Month Ending
April 30, 2022 Receipts Disbursements Journal
Adjustments*
Month Ending
May 31, 2022
General Fund 117,686,174 6,702,004 (5,152,788) 36,643 119,272,034
Special Revenue 48,468,249 272,065 (968,530) (105,235) 47,666,549
Debt Service 2,284,850 - - - 2,284,850
Capital Projects 38,923,074 1,402,454 (459,362) 130,235 39,996,401
Enterprise 13,154,490 140,361 (439,104) 413,360 13,269,107
Internal Service 7,816,682 - (473,354) (33,096) 7,310,232
Total $ 228,333,518 $ 8,516,884 $ (7,493,138) $ 441,907 $ 229,799,172
*Journal adjustments include transactions recorded in other systems and imported into the financial system,
Council-approved budget adjustments, quarterly Cost Allocation Plan (CAP) charges, and quarterly interest
earnings.
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The $229.8 million in cash and investments includes $33.4 million in cash, $21.1 million in
cash equivalents, $156.9 million in investments, and $18.5 million restricted for funding
pension costs.
The City pools cash for all funds except restricted funds. However, the City accounts for
interest earnings, revenues, and expenditures separately for each fund to adequately meet
the purpose and restrictions of each funding source. Pooling funds is a common and
appropriate practice used in public agencies. By pooling funds, the City can benefit from
economies of scale, diversification, liquidity, and ease of administration.
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Cash and Investments – General Ledger Balance
Month Ending
April 30, 2022
Month Ending
May 31, 2022
% of
Portfolio
Cash in banks and on hand
Operating Checking (Wells Fargo) 31,879,299 31,045,048 14%
Workers' Compensation Checking (Wells Fargo) 4,719 26,623 0%
Payroll Checking (Wells Fargo) - - 0%
Restricted for Bond Repayments1 (BNY Mellon) 8,333 2,286,333 1%
Petty Cash and Change 5,100 5,100 0%
Cash Equivalents
Local Agency Investment Fund 21,059,752 21,059,752 9%
Investments
Investments (Chandler) 156,885,311 156,885,311 68%
Restricted for Pension2 (PARS) 18,491,004 18,491,004 8%
Total Cash and Investments3 $ 228,333,518 $ 229,799,172 100%
1 Cash held by fiscal agent for bond repayments
2 In accordance with GASB 67/68, the assets in the Section 115 Pension Trust are reported as restricted cash
and investments in the General Fund. The assets can only be used to fund CalPERS costs.
3 Assets in the Section 115 OPEB Trust are excluded as the City cannot use these assets to fund its own
operations. The assets are held in trust for retirees’ post-employment health benefits.
The table below shows the bank balances for the City's cash and investments. Bank and
General Ledger balances differ due to timing. Bank balances do not include outstanding
checks and deposits in transit. The General Ledger is updated quarterly with interest
earnings and updated annually with the year-end investment market values.
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Cash and Investments – Bank Balance
Month Ending
April 30, 2022
Month Ending
May 31, 2022
% of
Portfolio
Cash in banks and on hand
Operating Checking (Wells Fargo) 31,788,785 30,519,591 14%
Workers' Compensation Checking (Wells Fargo) 7,279 26,922 0%
Payroll Checking (Wells Fargo) - - 0%
Restricted for Bond Repayments1 (BNY Mellon) 8,333 2,286,333 1%
Cash Equivalents
Local Agency Investment Fund 21,059,752 21,059,752 10%
Investments
Investments (Chandler) 148,861,823 149,697,509 68%
Restricted for Pension2 (PARS) 16,368,261 16,302,481 7%
Total Cash and Investments3 $ 218,094,232 $ 219,892,588 100%
1 Cash held by fiscal agent for bond repayments
2 In accordance with GASB 67/68, the assets in the Section 115 Pension Trust are reported as restricted cash
and investments in the General Fund. The assets can only be used to fund CalPERS costs.
3 Assets in the Section 115 OPEB Trust are excluded as the City cannot use these assets to fund its own
operations. The assets are held in trust for retirees’ post-employment health benefits.
Local Agency Investment Fund (LAIF)
LAIF is an investment pool administered by the State of California Treasurer and
governed by California Government Code. The City can withdraw funds from LAIF at
any time. As a result, the City uses LAIF for short-term investment, liquidity, and yield.
As of May 31, 2022, the City's LAIF account had a balance of $21.1 million, no change from
the prior month. Interest is deposited quarterly and was most recently deposited in April
2022. The City did not make any deposits or withdrawals in May 2022.
Investment Portfolio
In FY 2018-19, the City selected Chandler Asset Management for investment management
services through a Request for Proposal (RFP). Under the City's Treasurer's direction,
Chandler Asset Management manages the City's investment portfolio in accordance with
the City's investment objectives. The City's investment objectives, in order of priority, are
to provide:
• Safety to ensure the preservation of capital in the overall portfolio
• Sufficient liquidity for cash needs
• A market rate of return consistent with the investment program
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The performance objective is to earn a total rate of return through a market cycle equal to
or above the return on the benchmark index. Chandler Asset Management invests in high-
quality fixed-income securities consistent with the City's Investment Policy and California
Government Code to achieve the objective.
As of May 31, 2022, the portfolio's market value was $149.7 million, compared to $148.9
million at the end of the previous month. The portfolio's book value was $154.9 million,
compared to $154.8 million at the end of the prior month. The average maturity was 2.84
years, and the average modified duration was 2.49. The rate of return was 0.57% for the
month.
Below are historical monthly comparisons for the City's portfolio:
April 30, 2022 May 31, 2022
Market Value 148,861,823 149,697,509
Par Value 154,612,129 154,801,899
Book Value 154,828,347 154,937,218
Average Maturity 2.83 years 2.84 years
Average Modified Duration 2.50 2.49
Average Purchase Yield 1.37% 1.41%
Average Market Yield 2.94% 2.86%
Average Quality1 AA/Aa1 AA/Aa1
1 S&P and Moody's respectively
The portfolio's market value fluctuates depending on interest rates. When interest rates
decrease after an investment is purchased, the market value of the investment increases.
In contrast, when interest rates increase after an investment is purchased, the market value
of the investment decreases. At the time of purchase, the City intends to hold all
investments until maturity, so changes in market price do not affect the City's investment
principal. The market values were provided by Chandler Asset Management.
Section 115 Trust Investment Portfolio
The City established Section 115 Trusts to reduce pension rate volatility and pre-fund
Other Post-Employment Benefits (OPEB) costs. A Section 115 Trust is a tax-exempt
investment tool that allows local governments to pre-fund pension and retiree health
costs. Once contributions are placed into the trust, assets from the trust can only be used
to fund retirement plans.
The Section 115 Trusts are not governed by the City's Investment Policy but by separate
investment policies. On December 7, 2021, City Council approved the Pension Trust
Investment Policy and OPEB Trust Investment Policy. Public Agency Retirement Services
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(PARS) administers the trust, and US Bank manages the investments per the investment
policies.
Both Section 115 Trusts are invested in "balanced" portfolios. The investment objective is
designed to provide a moderate amount of current income with moderate growth of
capital. It is recommended for investors with a long-term time horizon. The strategic asset
allocation ranges for this objective are:
Asset Class Range Target
Equities 50-70% 63%
Fixed Income 20-40% 29%
Real Estate 0-15% 5%
Commodities 0-10% 2%
Cash 0-10% 1%
As of May 31, 2022, the Section 115 Pension Trust had a balance of $16.3 million, a decrease
of $0.1 million from the prior month. The Section 115 OPEB Trust had a balance of $33.5
million, a decrease of $0.1 million from the prior month. The investment returns for the
Section 115 Trusts were -0.37% for the month. The City did not make any contributions or
receive any distributions in May 2022.
Compliance
All of the City's investments comply with state law and the City's Investment Policy. In
compliance with California Government Code 53646 (b)(3), the City maintains the ability
to meet its expenditure requirements for the next six months.
Sustainability Impact
No sustainability impact.
Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by: __________________
Thomas Leung
Acting Finance Manager
Reviewed by: __________________
Kristina Alfaro
Director of Administrative Services and City Treasurer
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Approved for Submission by: __________________
Jim Throop
City Manager
Attachments:
A – Chandler Investment Report May 2022
B – Chandler Custodial Statement May 2022
C – PARS Pension and OPEB Statement May 2022
D – LAIF Statement May 2022
E – Wells Fargo Operating Checking Account Statement May 2022
F – Wells Fargo Payroll Checking Account Statement May 2022
G – Wells Fargo Workers' Compensation Checking Account Statement May 2022
H – Wells Fargo Employee Benefits Checking Account Statement May 2022
I – BNY Mellon Statement May 2022