REPORT TO COUNCIL
SUBJECT
Title
Receive and File the City of Sunnyvale Investment Report - 2nd Quarter 2015
Report
BACKGROUND
In accordance with California Government Code Section 53646, staff is submitting the attached investment report for Council’s review. The report includes all investments managed by the City of Sunnyvale. Staff invests all funds not immediately needed for disbursement. The current portfolio market value is $314,198,929.
Funds for the City’s Deferred Compensation Plan, the City’s Retirement Plan, Retiree Medical Trust, and any proceeds of debt issuance are not invested by City staff. These funds are managed by third party administrators.
EXISTING POLICY
California Government Code Section 53600 et seq., strictly governs which investments public agencies can hold. In some cases, State law also governs what percentage of the portfolio can be invested in certain security types, maximum maturities, and minimum credit ratings by the major rating agencies (Standard & Poor’s and Moody’s Investors Service). Public agencies can only invest in fixed income securities. The purchase of stock is prohibited. As a result, the City primarily invests in highly rated securities such as U.S. Treasury, Federal agencies, and government sponsored enterprise debt.
The California Government Code also requires investment objectives of safety, liquidity, and yield in that order. As such, safety of principal is the foremost objective of the City’s investment program. The portfolio must remain sufficiently liquid to enable the City to meet all cash requirements. The City’s portfolio is diversified by type of investment, issuer, and maturity date. Diversification is required in order that potential losses on individual securities do not exceed the income generated.
The City Council first adopted a policy (7.1.2 Investment and Cash management) governing the investment of City funds on July 30, 1985. This policy is reviewed and adopted annually; the most recent was adopted on October 28, 2014 (RTC 14-0804) for Fiscal Year 2014/15. The City’s investment policy follows the Government Code and includes additional restrictions on some investments such as a lower allowable percentage per investment type or issuer than State law.
ENVIRONMENTAL REVIEW
This action does not require environmental review because it is not a project that has the potential for causing a significant impact on the environment. (CEQA Guideline 15061(b)(3).) Government administrative and organizational activities that will not result in a direct or indirect change in the physical environment do need to be reviewed under CEQA. (CEQA Guideline 15378(b).)
DISCUSSION
This report provides information on the values (par, book and market), the type of investment, issuer, maturity date and yield of each investment. The par value of a bond is the amount that the issuer agrees to repay the City by the maturity date. The book value is what the City initially paid for the bond and market value is what the bond is worth now.
The market value is determined by an independent pricing service at the end of every accounting period. In some cases, the City may have investments with a current market value that is greater or less than the recorded value. These changes in market value are due to fluctuations in the marketplace and have no effect on the City’s financials. The City will receive full par value for the investment at maturity.
Summary and detailed information on each security is provided. Also included is an activity report of sales, purchases and maturities for this accounting period as required by Government Code 53607. An evaluation of portfolio performance this accounting period compared to the previous accounting period and compared to the same accounting period of last fiscal year is also included. The City’s portfolio has a current yield of .78%. Yields on allowable investments continue to be historically low as concerns with the world economy fuel demand for high quality investments. In addition, the Fed continues to hold the Federal Funds Rate down to stimulate economic growth.
Short term investments are placed in an interest bearing checking account with our primary banking institution, Union Bank and with the State’s Local Agency Investment Fund (LAIF) to meet the liquidity needs of the City. LAIF is a program created by statute as an investment alternative for California’s local governments and special districts. This program offers local agencies the opportunity to participate in a major portfolio pool administered by the State Treasurer’s office. The current yield for the LAIF portfolio is .29%.
FISCAL IMPACT
Interest earnings for FY 2014/15 as of Period 13 for all City funds totaled $2,130,004.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website.
RECOMMENDATION
Recommendation
Receive and file the City of Sunnyvale FY 2014/15 Period 13 investment report.
Staff
Prepared by: Timothy J. Kirby, Assistant Finance Director
Reviewed by: Grace K. Leung, Director, Finance
Reviewed by: Jane Chambers, Interim Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENT
1. City of Sunnyvale’s FY 2014/15 Period 13 Investment Report